PayPal pops on earnings report

PayPal Holdings (PYPL) closed up 9.42% today to $84.78 on third quarter earnings, announced after the close yesterday, that beat Wall Street projections. Analysts had expected 54 cents a share against a report of 58 cents a share. Revenue of $3.68 billion beat the consensus by $20 million. In the period the company added 9.1 million active accounts to bring the total for active accounts up to 254 million, a15% year over year increase. Payment transactions were up in numbers to 2.5 billion, s 27% increase year over year, and total payment volume climbed 24% year over year to $143 billion.

One big driver for the better than expected results was PayPal’s Venmo person to person payments platform. Total payment volume on the platform gained 78% year over year to $16.7 billion. The number of Venmo users hit a record for a third straight quarter. Wall Street has been skeptical of PayPal’s ability to make money from Venmo, but this quarter showed progress on that metric. According to the company, about 24% of Venmo users participated in a “monetizable transaction” in the third quarter.

Operating margin for PayPal climbed to 21.4% from 19.9% in the third quarter of 2017.

Forward guidance had a lot to do with the bump upwards in PayPal shares. For the fourth quarter the company issued revenue guidance of $4.195 billion to $4.275 billion. The Wall Street consensus was $4.21 billion. For the fourth quarter PayPal projected earnings per share at 65 cents to 67 cents. Wall Street analysts had been looking for 65 cents.

PayPal is a member of my long-term 50 Stocks Portfolio.