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The core business of PayPal (PYPL) continues to evolve, and the company expects the same thing to happen again next year.
After the bell on Thursday, PayPal announced a 3.68 billion dollar business volume for the third quarter (+ 14% per annum) and non-GAAP EPS of 0.58 USD, exceeding analysts' estimates consensus of $ 3.66 billion and $ 0.54. The company also posted fourth-quarter revenue of $ 4.195 billion to $ 4.275 billion (+ 13% to 15%) and $ 0.65 to $ 0.67 EPS, a mid-way consensus $ 4.21 billion and $ 0.65.
Shortly after, PayPal – which, it should be noted, has the habit of guiding in a cautious manner – has announced 17% growth in its turnover for 2019 on the foreign exchange market and 20% BPA growth. Revenue growth outlook compares favorably to consensus before earnings for 16% growth in dollar terms, particularly due to the recent strengthening of the dollar, while the EPS outlook is slightly lower than consensus for 21% growth .
Also: Shortly before the release of its third quarter report, PayPal announced an alliance with American Express (AXP) that allows (among other things) PayPal users to apply AmEx reward points to transactions and transactions. calls for PayPal to identify "more clearly" AmEx cards in PayPal wallet. The agreement is similar to the one that PayPal has already signed with Visa, Mastercard and Discover, and follows the agreement with Walmart (WMT) that will allow Walmart buyers to instantly withdraw money from their PayPal accounts for a $ 3 fee. .
At the time of writing this article, after-hours stock prices have increased 6.4% to $ 82.46. Here are some findings from the report and PayPal's appeal.
1. M & A transactions have a positive and negative impact on PayPal's growth rates
Although PayPal has officially announced revenue growth of 14%, this growth would have been 21% without the close in July of an amount of $ 6.9 billion intended for the sale of the credit portfolio to PayPal's usage at Synchrony Financial (SYF). And the growth would have been even greater without the decision made by PayPal last November to suspend the activities of the company paying bills utility companies and telecommunications, TIO Networks (acquired in July 2017 for $ 233 million) as a result of a data breach.
Naturally, the Synchrony agreement will continue to weigh on short-term growth rates: PayPal expects it to also have a 7-point impact on business growth. fourth quarter and 3.5 percentage points over 2019. On the other hand, recent acquisitions, the largest of which is the purchase of its $ 2.2-billion rival iZettle, are expected to a 1.5 point boost to growth in 2019, while reducing 2019 earnings per share by $ 0.08 a year. $ 0.10. PayPal expects the acquisitions will generate profits in 2020.
2. Basic payment statistics remain in good health
PayPal's Total Payments (POS) grew 24 percent a year to $ 143 billion. It would have increased by 29% if it were TIO networks and a stronger dollar. Payment transactions grew by 27% to 2.5 billion, and the average 12-month payment transaction per active account increased from 33.3 to 33.5 a year ago. 9.1 million net asset accounts were added, bringing the total to 254 million. And the mobile payment volume (now 40% of POS) has increased 45% to $ 57 billion.
PayPal also revealed that its One Touch service, which allows mobile users to pay for items without having to re-enter their login credentials, is now used by 112 million consumers (compared to 50 million in March 2017). While worries over competition from Apple's payment platforms (AAPL) and Amazon (AMZN) have not gone away, PayPal is clearly in the spotlight, while benefiting from the continued sustained growth of e-commerce and other types of digital transactions.
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PayPal continues to post solid growth in the active account. Source: PayPal.
3. Venmo continues to grow rapidly – and monetization is progressing
Substantial contribution to PayPal's growth on mobile phones: Venmo's POS increased by 78% a year for the second consecutive quarter to $ 16.7 billion. PayPal also reported that Venmo, whose social functions have made it popular with young US consumers, added a record number of new net active accounts for the third consecutive quarter (no figures were provided).
And, as PayPal recently stepped up efforts to monetize Venmo, the company revealed that 24% of Venmo users now have "participated in a monetizable transaction." That's up 17% a quarter ago and 13% up in May.
The Pay with Venmo service, which allows Venmo to be used on websites and apps, saw an increase of 185% in the number of monthly active users from August to September, while the Venmo debit card, launched in June with MasterCard showed a growth of 320%. And the Venmo instant transfer service, which (for a fee), allows users to instantly withdraw money from their pay, handled more than $ 1 billion last month.
4. Slow growth in spending drives revenue
On a non-GAAP basis, non-transactional PayPal charges increased only 9.5% annually and accounted for 33.5% of revenue, down from 34 , 8% a year ago. The company adds that, taking into account the Synchrony agreement and recent acquisitions, these expenses increase by only 6%.
While PayPal expects BPA growth to outstrip revenue growth next year, despite some downward pressure on net income from its acquisitions, it appears the company will also maintain spending spending in the next year. ;next year.
5. PayPal's "dependency" on eBay continues to decline
On the call, Chief Financial Officer John Rainey revealed that eBay (EBAY), which announced in January its intention to make the internal payment solution its primary means of payment for the majority of its customers in the market by 2021, accounted for only 11% of the PayPal payment volume for the third quarter. . This represents a decrease of 13% in Q4 and 20% three years ago.
And although eBay has claimed that the recent roll-out of its Managed Payments service to a small number of US sellers has been a success, among other things, it claims that sellers are satisfied with the ease of use of the service and reduction of transaction costs. – CEO Dan Schulman said that some of these sellers had experienced a significant drop in sales, with PayPal no longer being a payment option.
"[I]If you look at the sellers' comments on the eBay sellers forum and look at what these sellers are saying, those who switched to intermediated payments, you will see comments that their sales have dropped from 40% to 60% and that "They're asking PayPal again," said Schulman. PayPal should be offered as a payment option for eBay Managed Payments starting in the summer of 2019.
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