PayPal Stock Down on Lowered Revenue Forecast


Jul. 25 2019, Published 12:26 p.m. ET

PayPal stock drops after Q2 earnings

The stock of payments company PayPal (PYPL) fell as much as 6% in after-hours trading on Wednesday. The stock decline came after the company failed to beat Wall Street estimates for Q2 revenues, though earnings topped analysts’ expectations. PayPal also disappointed investors by slashing its revenue guidance for the full year.

PayPal stock is down by more than 3% in pre-market trading on Thursday. The stock closed up 0.9% on July 24 to $121.30. On a year-to-date basis, PayPal stock has jumped around 44.3%, more than double the gains of the S&P 500. The S&P 500 has increased by around 20.5% in the same period.

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PayPal earnings

PayPal reported adjusted earnings of $0.86 per share in Q2 2019, better than Wall Street estimates of $0.75 per share. Earnings also surged 47% YoY in the second quarter. The adjusted figure excluded the investment benefits of $0.14 per share in Q2 2019.

Notably, the company invested in MercadoLibre (MELI) earlier this year. The deal with MercadoLibre would help PayPal expand its business in the digital commerce and payments area. Payments peer Visa (V), which reported upbeat earnings recently, also has a partnership with MercadoLibre.

PayPal revenues

The revenues rose 12% YoY to $4.31 billion. However, it lagged the analysts’ expectations of $4.33 billion. The YoY revenue growth was driven by total payments volume, which grew by 23.7% to $172 billion. However, the growth rate decelerated from 29% from the year-ago quarter. Notably, the revenue growth rate has been declining on a YoY basis from the first quarter of 2018. The company’s high-growth product Venmo processed $24 billion in volumes. The company also added 9 million net new active accounts during the quarter.

PayPal made a strategic investment of $500 million in Uber and extended its global partnership with the latter during the quarter. In July, PayPal launched its Xoom product services in the UK and 31 other European markets.

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Revenue guidance slashed

For the third quarter, PayPal expects revenue in the range of $4.33 billion to $4.38 billion. PayPal expects third-quarter earnings in the range of $0.69 to $0.71 per share. Analysts expect revenues of $4.39 billion and earnings of $0.70 per share for the third quarter.

For the full year, the California-based company reduced its revenue guidance. The company now expects revenue in the range of $17.6 billion and $17.8 billion for 2019. Analysts expect 2019 revenue to be $17.89 billion.

The revenue guidance implies a lower revenue growth range of 14% to 15%, down from the earlier growth rate expectations of 16% to 17%. PayPal expects a delay in product integration and pressure from currency to hurt the full-year revenues. The company is also likely to postpone its pricing initiatives later, which would further weigh on the revenues.

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PayPal raises earnings guidance

PayPal has, however, raised its full-year earnings guidance in the range of $3.12 to $3.17 per share. The company earlier anticipated the full-year earnings in the range of $2.94 to $3.01 per share. Analysts, however, expect 2019 earnings to be $3.06 per share.

Peers’ performance

Along with PayPal, Internet peer Facebook (FB) also reported its Q2 earnings results. Facebook reported better-than-expected numbers in the second quarter. While Facebook’s Q2 revenues were $16.9 billion, up 27.6% YoY, adjusted earnings were at $1.99 per share in the second quarter.

Social media giant Snap (SNAP) posted losses of $0.06 per share in Q2 recently, but losses were narrower than analysts’ expectations. Snap revenues of $388 million came in ahead of Wall Street estimates in the second quarter.

Internet company eBay (EBAY) also delivered upbeat earnings and revenues in the second quarter and raised its profit forecast for the full year. eBay’s earnings also increased by 28.3%, while revenues were up nearly 2% in the second quarter of 2019.


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