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PayPal Holdings
shares tumbled as much as 5% in Monday’s after-hour trading as the payment giant said it might not meet the expectations for the current quarter’s revenue and earnings.
For its latest fiscal quarter ended in September, the company (ticker: PYPL) reported net income of $1.09 billion, or 92 cents a share. After adjusting for stock-based compensation and other expenses, the stock earned $1.11 a share, higher than $1.07 per share from the year-ago period and analysts’ consensus expectation of $1.07 per share.
PayPal
‘s revenue for the third quarter also jumped by 13% from a year ago to $6.18 billion. Analysts had been expecting $6.23 billion.
But what spooked investors the most was probably the firm’s subpar outlook for the fourth quarter: PayPal expects $6.85 billion to $6.95 billion in revenue and $1.12 in adjusted earnings per share—both are much below what Wall Street had been looking for. Analysts polled by FactSet were anticipating revenue to reach $7.24 billion and adjusted earnings to reach $1.28 per share for the holiday quarter. But the party might be spoiled by the end of stimulus payments and the ongoing global supply-chain disruptions.
PayPal stock more than doubled in 2020 as the online payment giant became a major beneficiary of the surging e-commerce volume during the pandemic. But the shares have tumbled 18% in the past three months and are down 2% in 2021, as investors turned uneasy about the stock’s rich valuation––reaching 64 times forward earnings in February––and the potential acquisition of social media company Pinterest (PINS). PayPal later said it was not pursuing the deal for the time being.
On Monday, Venmo, the peer-to-peer payment app under PayPal, also announced a new partnership with
Amazon.com
(AMZN), through which shoppers on Amazon’s e-commerce website and mobile apps could use Venmo as a checkout option starting from next year. This deal came as PayPal prepares for its future without contributions from its long-term e-commerce partner
eBay
.
EBay purchased PayPal back in 2002 and spun it off in 2015. PayPal had continued to be the major payment processor for the global online marketplace despite the split. But eBay has been breaking away from PayPal since last year and transitioning sellers to its own payment system. PayPal said its transaction volume on eBay marketplaces dropped 45% in the past quarter and now represents just less than 4% of its revenue.
PayPal’s Venmo app, on the other hand, has been growing rapidly, with payment volume jumping 36% year-over-year to $60 billion in the last quarter. In the third quarter, PayPal’s total payment volume––including those from Venmo––reached $310 billion, up 26% from a year earlier.
“This [the Amazon deal] is obviously a very significant effort in our Venmo monetization efforts,” PayPal CEO Dan Schulman said in the earnings call after the report. It “marks the beginning of an exciting journey with Amazon, now that we’re no longer constrained by the contractual obligations of the eBay operating agreement.”
PayPal has also been making a big push into crypto since last year. Its Venmo and PayPal platforms now both allow users to buy, sell , and hold a selection of cryptocurrencies including Bitcoin and Ethereum.
Write to Evie Liu at evie.liu@barrons.com