By Emily Bary
PayPal Holdings Inc. topped expectations Wednesday with its holiday-quarter results, but the company’s forecast for the current period came up short.
The payment giant’s report and commentary highlight how the PayPal /zigman2/quotes/208054269/composite PYPL -1.33% story has become more complicated in recent quarters, as the company prepares for a change in its relationship with eBay Inc. /zigman2/quotes/204653455/composite EBAY -3.62% , works to integrate recent acquisitions like its $4 billion purchase of Honey, and deals with strategic investments throughout the broader tech space.
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Shares were off about 3% in after-hours trading Wednesday following PayPal’s investor call, after paring back some of their earlier losses.
For the December quarter, PayPal saw adjusted earnings per share rise to 86 cents from 69 cents, ahead of the FactSet consensus of 83 cents. PayPal’s revenue grew to $4.96 billion from $4.22 billion, also above the FactSet consensus, which called for $4.94 billion.
Total payment volume increased 22% to $199 billion, but the rate of growth decelerated from 25% in the third quarter, something executives attributed to the lapping of PayPal’s iZettle acquisition in 2018. Volume growth has also been impacted by challenges at eBay, but management argued that PayPal’s increasingly diversified business is reducing the company’s dependance on eBay revenue.
For the current quarter, PayPal expects adjusted EPS of 76 cents to 78 cents on revenue of $4.78 billion to $4.84 billion. The consensus forecast currently projects 82 cents in adjusted EPS and $4.85 billion in revenue.
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Keefe, Bruyette, & Woods analyst Sanjay Sakhrani suggested in a note to clients that analysts’ forecasts may not have “fully contemplated” dilutive impacts from the Honey deal.
Looking at the full year, the company expects adjusted EPS of $3.39 to $3.46 on revenue of $20.8 billion to $21 billion, a mixed forecast that came in below consensus expectations for $3.49 a share in adjusted earnings but exceeded the forecast for $20.78 billion in revenue. The company expects total-payment-volume growth in the “mid-20s” for the full year.
“We think the updated guidance reflects good, consistent secular growth and may allay some fears tied to the eBay migration, although we acknowledge that the stock momentum into the quarter may suggest some were expecting upside to guidance,” Jefferies analyst John Hecht said in a note.
PayPal also delivered updates on Venmo in the report, disclosing that the peer-to-peer service had more than 52 million active accounts as of the end of the quarter, up from over 40 million when the company last provided a metric in April. The revenue run rate for Venmo is over $450 million, Chief Executive Dan Schulman said on the earnings call.
Schulman also pointed to Pay With Venmo as a priority in the year ahead, referring to a function that lets Venmo users purchase items and services with their accounts much like they would with the traditional PayPal button.
“There’s a lot of work going on around that right now because we think that’s a very big opportunity that we did not take as much advantage of last year as we probably could have,” he said.
He called out offline sales as another “big opportunity for us” as the company pushes its iZettle card-acceptance tool, further enables QR-code usage, and gets deeper into the world of credit cards. PayPal announced Visa Inc. /zigman2/quotes/203660239/composite V -2.69% as the network partner for an upcoming Venmo credit card.
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The results came a few hours after Mastercard Inc. /zigman2/quotes/207581792/composite MA -4.62% posted better-than-expected earnings for its holiday quarter, and a day before Visa delivers its own numbers.
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PayPal shares have gained 12% over the past three months, as the S&P 500 /zigman2/quotes/210599714/realtime SPX -1.60% has risen 8%.