PayPal Holdings Inc. (PYPL, Financial) announced third-quarter earnings after the market’s close on Thursday, Oct. 19. Revenue and earnings beat analysts’ estimates for the quarter. The stock is up 6% following the announcement and 81% for the year.
Revenue of $3.24 billion beat estimates by $60 million and increased 21.3% from the comparable quarter. Earnings per share of 46 cents beat estimates by three cents and increased 31% from the comparable quarter.
Transaction revenue accounted for 87% of total revenue in the third quarter. Transaction revenue increased 22% from the comparable quarter. Other value-added services also increased. At $406 million, other value-added services was up 15% from the comparable quarter.
Venmo’s success contributed to the quarter’s strong results and the company enhanced its services in the fourth quarter. In October, it announced a partnership with U.S. retailers allowing customers to use the Venmo app at more than two million stores. Prior to the announcement, Venmo was only available for peer-to-peer payments.
In 2017, PayPal has been aggressively adding new partners in the U.S. and internationally. It has signed two deals, adding partnerships with Mastercard (MA, Financial) and Visa (V, Financial) for global expansion. In August, it also acquired online lender Swift Financial to further build out its lending business within the other value-added category.
For the third quarter, net income was $560 million. At $560 million, net income is up $135 million or 32% from the comparable quarter.
For the fourth quarter, the company is estimating comparable quarter revenue growth of 20% to 22% at $3.570 billion to $3.630 billion. It expects adjusted earnings per share in the range of 50 cents to 52 cents. For the full year, PayPal expects a revenue increase of 19% to 20% at $12.920 billion to $12.980 billion. For the year, it estimates adjusted earnings per share to be in the range of $1.86 to $1.88.
PayPal CEO Dan Schulman had the following comments on the company’s third-quarter results.
The company currently has 1.2 billion shares outstanding with a market cap of $85.4 billion. Institutional investors own 82% of the outstanding shares. The company’s top institutional investor is Fundsmith LLP with 7.91% of the outstanding shares.
Disclosure: I own PayPal.
