Friday, October 20, 2017

PayPal Posts Stronger-Than-Expected Results on Mobile Growth

PayPal Posts Stronger-Than-Expected Results on Mobile Growth

Online payments company raises outlook for the year, pushing shares up after hours

PayPal Holdings said Thursday that third-quarter profit rose 18% from a year earlier and executives projected strong growth for 2018 thanks in part to payments platform Venmo finally contributing to revenue.
The San Jose, Calif.-based payments company reported a quarterly profit of $380 million, or 31 cents a share. That compares with a profit of $323 million, or 27 cents a share, in the same period of 2016. Excluding certain items, per-share earnings rose to 46 cents, above the estimate of analysts polled by Thomson Reuters.



PayPal: After The Earnings Beat, CEO Talks Venmo’s Growth and More

“Venmo is much less a peer-to-peer platform than it is a social experience,” CEO Dan Schulman says.

PayPal beat earnings expectations once again on Thursday.
PayPal beat earnings expectations once again on Thursday. ILLUSTRATION: DAVID PAUL MORRIS/BLOOMBERG
PayPal is getting more people to use its services more often, and that paid off nicely in its latest quarter.
The company added 8.2 million net new accounts, the largest organic gain in at least three years. Meanwhile, PayPal grew the average number of transactions per average account over the last year to 33, up 9%. That translated to earnings per share of 46 cents a share, 3 cents above Wall Street’s estimates, on revenue of $3.2 billion.
Further growth, though, may come from some of PayPal’s newer initiatives, including Pay With Venmo, by which people can use their Venmo accounts when shopping at online merchants. The company announced earlier this week that it would start rolling out the feature to more than two million PayPal merchants.
Investors are excited about PayPal’s interest in making money off of the popular peer-to-peer platform, which it acquired via the acquisition of Braintree a few years back. Management includes a “modest” contribution from Pay With Venmo in its prediction for 20% revenue growth next year, a forecast that came in above analysts’ expectations.
But CEO Dan Schulman thinks the benefits of Pay With Venmo go beyond monetization, based on his observations of those who’ve so far used the service with a handful of merchants that were piloting the program. “Engagement goes up significantly when a Venmo user starts to pay with Venmo,” he told Barron’s Next Thursday after the company’s earnings call. “When engagement goes up, churn goes down.” Churn refers to users leaving a service.
After the Pay With Venmo rollout, Venmo users will be able to shop online using the platform, which is the core strength of PayPal. And PayPal offers its own peer-to-peer payment tools, which are popular, though less sexy, than Venmo’s. But Schulman isn’t worried about a blurring of the two services. “Venmo is much less a peer-to-peer platform than it is a social experience,” he says, given that the users check the Venmo app multiple times a week just to see what they’re friends are paying for and who they’re sending money to.
He adds PayPal and Venmo’s checkout capabilities carry the same “take rate,” meaning the cut that PayPal gets per transaction. And Pay With Venmo, meanwhile, might end up being more profitable that PayPal checkout, since Venmo’s user base is more likely to fund their transactions with debit cards or bank account balances. Processing payments made using these methods costs less for PayPal, compared to processing credit-card transactions.

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