PayPal put on a strong finish to 2019, managing to beat analyst estimates nearly across the board in terms of revenue, active usership and total payments volume processed. However, despite a solid holiday quarter, the digital payments giant found stock trading concerns about its Q1 forecasts. Chief Financial Officer John Rainey commented that there are some concerns about economic uncertainty to warrant caution, despite trends currently remaining strong.
“There's always a certain amount of trepidation that exists about the macroeconomy,” Rainey said on a call with analysts.
PayPal CEO Dan Schulman, on the other hand, was more upbeat during the call, noting that PayPal is “very pleased with the year in front of us.” He added that the firm has its sights set on aggressively expanding the platform’s capabilities and geographic footprint in the year to come.
On those fronts, Schulman remarked often on PayPal’s $4 billion acquisition of shopping rewards platform Honey Science Corporation that closed earlier this month. Schulman told investors that combining the two platforms will allow them to leverage their complementary capabilities, and drive customer engagement at an early phase in the commerce journey. In addition, the acquisition of a 70 percent stake in GoPay, and the licensure that accompanied it, has made PayPal the first foreign ePayments firm able to operate in China — and was crucial to making possible its cross-border payments partnership with UnionPay, announced last week.
“In 2020, we’re looking to grow our investments based on our recent acquisitions, building new infrastructure in China and other international markets, continuing work on monetizing Venmo and [expanding] our focus on our in-store initiatives,” said Schulman of PayPal’s areas of keenest interest for the next year.
In Q4 of 2019, PayPal saw adjusted earnings per share rise to $.86 from $.69 at the same time last year, and ahead of forecasts of $.83. Revenue came in at $4.96 billion, up from $4.22 billion, also ahead of pre-release predictions of $4.94 billion. Total payments volume was up 22 percent to $199 billion, though the growth rate declined from the 22 percent observed during Q3 — an effect Schulman attributed to the lapping of PayPal’s iZettle acquisition in 2018. Breaking the numbers down further, PayPal said it processed a total of roughly 3.5 billion payment transactions. For the full year, PayPal reported revenue of $17.77 billion and earnings per share of $3.10.
As for active users, PayPal added 9.3 million users in Q4, bringing its total active user base to 305 million. Schulman also noted on the call that engagement among active users grew 10 percent during the quarter to 40.6 transactions per active account. PayPal said it expects to add approximately 35 million net new active accounts in 2020 — including acquisitions, but excluding Honey.
Venmo saw its active user accounts rise to 52 million by the end of the quarter, up from the 40 million PayPal reported during its last official count in April. Venmo processed more than $29 billion of total payments volume, up 56 percent over the same period last year. Schulman noted on the earnings call that Venmo’s revenue run rate is more than $450 million, adding that the expansion of Pay With Venmo is a priority in the year ahead.
“There’s a lot of work going on around that right now, because we think that’s a very big opportunity that we did not take as much advantage of last year as we probably could have,” Schulman said.
As for what’s next, given its stated concerns about economic uncertainty, PayPal offered Q1 revenue guidance in the range of $4.78 billion to $4.84 billion, with earnings between $.76 and $.78 per share. That is quite a bit below analyst expectations, as they were looking for Q1 revenue of $4.85 billion with earnings of $.82 per share.
For the year, PayPal said it expects revenue in the range of $20.8 billion to $21 billion, with earnings per share between $3.39 and $3.46. That is slightly above Wall Street forecasts of $20.79 billion in revenue and earnings per share of $3.49.
The dimmer than expected outlook on Q1 didn’t fill investors with confidence, though, as PayPal’s stock price fell by about 3 percent in after-hours trading.