What To Watch When PayPal Reports Earnings

A good time was had by all on PayPal earnings day in 2018 as the digital payments network managed to beat Wall Street expectations in three out of three reported quarters. The question going into tomorrow’s earnings report is will PayPal go 4/4?

PayPal Q3 results have set expectations high.  PayPal beat earnings expectations of $.04 and revenue forecasts by about 20 million.  The firm also logged double-digit growth in overall transaction volume and payments volume, and high single-digit boosts in the number of payments per active account.  Payments transactions were 2.5 billion, a 27 percent gain, with total payments volume clocking in at $143 billion, that quarter.

PayPal also reported 254 million active accounts – 15 percent year-on-year growth – with 9.1 million added during Q3.

Venmo – PayPal’s P2P payment services also logged a particularly strong Q3 –  Venmo’s total payment volume spiked 78 percent and reached $17 billion. And nearly a quarter – or 24 percent of Venmo users – completed a “monetizable action.”

PayPal CEO Dan Schulman said on a call with analysts that the growth is encouraging:

“I’m especially pleased with the strong overall momentum surrounding Venmo,” PayPal CEO Daniel Schulman said on a call with analysts. “While it is still early, our monetization efforts appear to be reaching a tipping point.”

The strength of numbers in Q3 was such that PayPal raised its earnings and revenue estimates for Q4 – and for the full year, a move that the markets particularly liked at the time.

Tomorrow, the street finds out if PayPal lived up to the increased expectations it set for itself.

By the numbers – analysts are looking for $0.67 per share on revenue of $4.24 billion for the fourth quarter.  By comparison, in Q4 2017 PayPal put up profit of $0.55 per share on revenue of $3.74 billion.

PayPal outstripped analyst expectations in every other quarter of 2018, and many analysts in have noted a belief that  PayPal’s upwardly revised projections were still likely conservative.

“I don’t see any reason to believe that the company won’t continue to deliver,” one market watcher noted in The Motley Fool.

Still there are some areas that will of particularly interest when the numbers hit the wires.  Venmo’s growth and ongoing monetization efforts are likely to get a close looking from analysts.

Apart from the fact PayPal itself has been increasingly focused on Venmo – and its potential as a future revenue engine – outside news events are also driving that interest.

According to recent reports out of Zelle’s operator, Early Warning Services, the bank-backed rival P2P service is gaining an increased footing with both consumers and financial institutions.

According to Early Warning, Zelle reported a Q4 payment volume of $35 billion, up 12 percent from Q3 and 61 percent from a year before. During that time frame 135 million transactions were processed during that same time. The average transaction size on Zelle is $258 – notably higher than the average Venmo transaction.

Analysts will also be listening closely to what PayPal has to say about its international picture – particularly in India.  In early January, PayPal announced a more than twelvefold boost in revenue at its Indian payments subsidiary.

According to The Economic Times, PayPal is responding to the explosion in business with increased its investments in India, including a boost in technology augmentation, hiring new employees in the country and opening a new office in Mumbai.

“India is transitioning away from our biggest competitor (cash), and our digital platform and technology has immense scope to enable this at scale,” said Anupam Pahuja, country manager and managing director of PayPal India, at the time. “For us, the marathon has just begun.”

Investors will likely be interested in an update in the state of the race in that particular marathon, particularly given howincredibly competitive the payments and commerce landscape in India has gotten over the last 12 months.

Finally, as always investors will be looking at how active PayPal platform is itself – in terms of payments volume and consumer interest.  Going into tomorrow’s report, the consensus estimate among analysts for total consumer accounts is 263 million, which would represent year-on-year growth of 16.9 percent.  The street is also looking for total payments volume of $164.9 billion, a 27.3 percent increase  from the year-ago quarter.