Despite Topping Earnings Estimates, PayPal Revenue Falls Short

Shares of digital payment system PayPal fell as much as 6 percent in after-hours trading after the payments website and mobile app missed Wall Street’s second-quarter revenue estimates and, as a result, lowered its full-year guidance. 

That being said it should be noted that PayPal saw revenue rise by $4.31 billion in the quarter. This is 12 percent higher than the same period last year ($3.86 billion) but still below consensus expectations of $4.33 billion.  Accordingly, adjusted earnings per share fell to 72 cents. 

Furthermore, the San Jose, CA-based payments company slashed its full-year revenue guidance. This comes with some consideration for product integration delays, yet-to-be-implemented pricing initiatives and currency pressures.  All that in mind, PayPal now hopes to reach full-year revenue to register between $17.6 billion and $17.8 billion.  Still, this does not quite satisfy Wall Street’s expectations of $17.92 billion. In addition, PayPal projected lower revenue growth between 14 and 15 percent; still at least one percentage point below the range from the same period last year. 

But all that considered, PayPal still raised its full-year EPS guidance. Also, one of PayPal’s most closely watched health indicators, total payment volume, came in at $172.36 billion for the quarter. Up from $139 billion during the same quarter last year, this is fairly in line with forecast estimates of $171.49 billion. 

Finally, payment volume for PayPal’s peer-to-peer payment mobile app platform, Venmo, also underperformed.  While total payment volume rose 24 percent to $172 billion (slightly beating estimates), its TPV growth rate is slowing.  Lighter than expected this metric came in at $24 billion, significantly shy of the $28 billion analysts had prognosticated.  This is even as PayPal announced the app had 40 million users last quarter, adding 9 million net new active users.  But analysts are still watching closely to see if Venmo will finally become profitable.