Paypal reports strong third quarter profits thanks to sharp growth in mobile payments

It has expanded its reach to new customers in recent years through partnerships and acquisitions

Anna Irrera,Diptendu Lahiri
Friday 20 October 2017 10:18
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Paypal has partnered with household names such as Mastercard and Visa
Paypal has partnered with household names such as Mastercard and Visa

Sharp growth in mobile payments led PayPal to report a better-than-expected third-quarter profit on Thursday and lift its guidance for earnings through the rest of the year.

The San Jose, California-based payments company has been working hard in recent years to expand its reach to new customers through partnerships and acquisitions, particularly in mobile payments. Those deals are clearly starting to bear fruit, analysts said.

“It was just a very strong quarter across the board,” said A.B. Mendez, an analyst and fund manager at Frost Investment Advisors.

PayPal shares were up 3.9 per cent at $69.89 (£53.19) in after-hours trading following the results.

Since separating from online marketplace eBay in 2015, PayPal has reshaped itself from a company that mostly processed transactions for its parent to a payments giant that handles money transfers between other companies and customers, as well as friends, roommates, overseas relatives and small businesses.

It has partnered with household names, such as Mastercard, Visa, JPMorgan Chase, Alphabet’s Google, Apple, Facebook and Microsoft’s Skype, and acquired startups like online lender Swift Financial and remittances company Xoom. It also owns Venmo, the mobile payments app that is popular with young adults, and still handles transactions for eBay.

In a call with analysts, chief executive officer Dan Schulman characterised the third quarter as possibly the best since its split from eBay and said PayPal is on the hunt for more acquisitions.

“We have very strong balance sheet, and it’s a potential weapon for us as we think about competing going forward,” he said.

The company’s adjusted profit rose 32 per cent during the third quarter to $560m or 46 cents per share, beating the average analyst estimate of 43 cents, according to Thomson Reuters.

Revenue rose 21.4 percent to $3.24bn.

PayPal lifted its full-year adjusted earnings forecast to a range of $1.86 to $1.88 per share from $1.80 per share to $1.84 per share. It expects 50 cents to 52 cents per share in earnings during the fourth quarter, compared with an average analyst estimate of 51 cents.

Much of the gains have come from PayPal’s aggressive effort to pick up market share in the fast-growing mobile payments space.

Its mobile payments volume jumped 54 per cent during the third quarter compared with the year-ago period, to about $40bn. Total payments volume rose 31 per cent to $114bn.

Venmo, which allows individuals in the United States to send each other money through a mobile app, more than doubled its payments volumes. Earlier this week, PayPal said it would soon allow more than 2 million merchant customers to start accepting payments through the platform.

Reuters

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