PayPal’s (PYPL, Financial) third-quarter earnings confirmed the theory that its growth story is here to stay despite increasing competition on multiple fronts. PayPal reported earnings of 35 cents per share on the back of $2.67 billion in revenue; the market expected 35 cents earnings per share and $2.65 billion in revenues.
Quarterly revenues have grown in the 15% to 19% range in the last three quarters, as total payment volume (TPV) increased from $81 billion in the first quarter to $87 billion in the third quarter. One of the key factors that PayPal investors should be happy about is PayPal’s payment volume from mobile transactions has been on the rise.
In the first quarter PayPal’s mobile payment volume reached $21 billion, accounting for 26% of the total payment volume during the quarter; by the third quarter PayPal’s Mobile payment volume increased to $26 billion, accounting for 29% of its total payment volume. In other words, TPV increased from $81 billion to $87 billion during this period, and $5 billion of that $6 billion increase came from mobile payments.
Mobile transactions are growing at a much faster rate than other segments, which is a huge validation for the company’s efforts to strengthen its expertise in that space. With several top tech companies like Google, Apple (AAPL, Financial) and Samsung (XKRX:005930, Financial)(SSNLF, Financial) entering the digital payment space in a big way, there were a lot of questions about how PayPal would be able to compete with its deep-pocketed competitors. But so far, in the last three quarters alone, the company has accelerated its transactions in a huge way and already has a huge head start over its competitors.
On a related note, PayPal recently announced its plans to tightly integrate its product with Facebook (FB, Financial) Messenger.
“Global payments processor PayPal has decided to tightly integrate with Facebook Messenger. In a blog post released today the company said that it will soon roll out a payment option for its customers that will enable them to make payments via Facebook Messenger. The PayPal-Facebook Messenger integration will also make it easy to link PayPal accounts to Facebook accounts and use Messenger at the PayPal checkout point.” – 1reddrop.com
The company is coming out with all guns blazing on the mobile front, and it is an extremely smart move by the company to strengthen its position before its competitors can increase their size and scale up to PayPal’s transaction volume.
“We are on track to process well over $100 billion in mobile payment volume in the next 12 months. This is a remarkable achievement, considering we’ve cumulatively processed some $200 billion in mobile volume over the past 10 years.” – PayPal earnings call
The race to dominate mobile payments is on. Apple Pay is aggressively pushing its agenda, and Samsung and Google are waiting in the wings for the right opportunity to topple the iPhone giant. Now it looks to be a four-way fight to the finish, but PayPal is leading the way.
“A new estimate from Timetric shows Apple Pay processed $10.9 billion globally in 2015, with the overwhelming majority of that volume originating in the U.S., Reuters reported.” – Business Insider
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
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