PayPal Holdings, Inc. (PYPL) reported mixed fiscal 2021 third-quarter results. While earnings surpassed estimates, revenues missed the Street consensus. The payment processor also downwardly revised its FY 2021 earnings and revenue estimates. Furthermore, the company also inked a partnership deal with Amazon.com for facilitating Venmo users in the US to transact using Venmo on e-commerce websites. The deal will become effective next year. The stock closed at $205.42, down $24.00 or 10.46% from the prior close.
The San Jose, California-based company reported third-quarter revenues of $6.182 billion, an increase of 13.20% from $5.459 billion in the similar period last year.
For the quarter ending September 30th, 2021, PayPal posted earnings of $1.087 billion, or $0.92 per share, up from $1.021 billion, or $0.86 a share, in the quarter ending September 30th, 2020.
Excluding operating income adjustments, net gains on strategic investments, and the tax effect of non-GAAP adjustments, PayPal posted Q3 2021 adjusted earnings of $1.319 billion, or $1.11 per share, compared with adjusted earnings of $1.275, or $1.07 a share in Q3 2020.
Analysts surveyed by Reuters had anticipated the company to report earnings of $1.07 per share on revenues of $6.23 billion.
Commenting on the results, John Rainey, CFO and EVP, Global Customer Operations, said, “Our third-quarter performance demonstrates the strength of our diversified platform, our global reach, and the scalability of our business.”
Total Payment Volume (TPV) increased 26% y-o-y to $310 billion. Similarly, NNAs (Net New Active Accounts) rose by 13.30 million. PayPal ended the September quarter with 416 million active accounts. In percentage terms, active accounts increased 15% y-o-y in the recent quarter. Also, the number of payment transactions rose by 22% y-o-y in the September 2021 quarter. Furthermore, payment transactions per active account grew by 10% on a y-o-y basis. Free cash flow grew 20% y-o-y to $1.29 billion.
As mentioned above, following the agreement with Amazon, customers will be able to use their Venmo accounts to transact on the e-commerce platform Amazon and its mobile shopping app.
The payment volume of Venmo surged 36% y-o-y to $60 billion. Notably, the Venmo app started supporting cryptos in April 2021. Interestingly, eBay is working towards moving PayPal-dependent sellers to its in-house payment platform. PayPal revealed that transaction volume via the eBay platform has reduced by 45% in the September quarter and represented only 4% of the total revenue.
For the current (Q4) quarter, PayPal expects revenues in the range of $6.85 billion to $6.95 billion. Adjusted earnings are predicted to be $1.12 per share. Analysts polled by Refinitiv anticipate the company to report adjusted earnings of $1.27 per share on revenues of $7.24 billion.
PayPal also downgraded its full-year earnings and revenues estimates. The company now anticipates FY21 adjusted earnings of $4.60 per share on revenues of between $25.30 billion and $25.40 billion. Earlier, the company had issued an FY 2021 adjusted earnings outlook of $4.70 per share on revenues of $25.75 billion.
Analysts surveyed by Thomson Reuters anticipate the company to post third-quarter earnings of $4.73 per share on revenues of $25.77 billion. PayPal also expects FY 2021 TPV to increase in the range of 33% to 34%. Furthermore, the company anticipates ending the fiscal year with at least 430 million active accounts.
The quarterly earnings miss and downward revision of the FY 2021 earnings and revenue estimates are expected to keep the stock of PayPal range-bound with a slight bearish bias in the short term.
The historical price chart indicates that the stock is declining after failing to break the major resistance at 300. The next major support is anticipated only near 180. Additionally, the stock is trading below its 50-day moving average, while the MACD indicator has a negative reading. Therefore, we are anticipating the stock to remain in a downtrend in the near term.
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