What’s Driving PayPal’s Top-Line Growth?



Top-line growth accelerated

For 3Q17, PayPal (PYPL) reported not only revenue and earnings figures that grew from last year but also results that beat expectations.

PayPal reported revenue of more than $3.2 billion in 3Q17, implying year-over-year growth of 21%. Analysts on average were expecting the company to report revenue of $3.18 billion. It’s important to note also that PayPal’s top-line growth accelerated in the latest quarter. The company’s revenue grew 18% both in 3Q16 and 2Q17, compared to 21% growth registered in the latest quarter.

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EPS up 31% over the same quarter last year

PayPal posted adjusted EPS (earnings per share) of $0.46 in 3Q17, compared with a consensus estimate of $0.43. In 3Q16, the company posted EPS of $0.35, which shows that adjusted EPS grew 31% year-over-year in the latest quarter. Again, PayPal’s adjusted EPS growth accelerated in the latest quarter, considering that adjusted EPS rose 27% year-over-year in 2Q17 and 14% in 3Q16.

What underpinned PayPal’s revenue and earnings growth in the latest quarter?

Growth drivers in 3Q17

In 3Q17, several factors were in play, helping lift PayPal’s revenue and earnings metrics. For example, the company benefited from the strong growth of its customer base. PayPal added 8.2 million active customer accounts in 3Q17, compared with 6.5 million active customer accounts added in 3Q16. PayPal also benefited from a more active customer base. For example, the company processed 1.9 billion payment transactions in 3Q17—up 26% year-over-year. Payment transaction per active account also grew 9% year-over-year.

PayPal’s 3Q17 showed that the company is taking competitive threats from Square (SQ) and Apple (AAPL) in its stride. Square and Apple are battling PayPal for the control of merchant payment processing market as they seek to capitalize on the rise of e-commerce. Competition between PayPal and these rivals has moved beyond the US (SPY) into overseas markets such as Europe (EFA).


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