PayPal shares slipped today following last night’s slight revenue miss. The stock fell by as much as 1.73% to $35.89 per share in afternoon trading today even though the digital payments processor beat the consensus estimate for earnings.

Paypal Holdings Inc Starts Strong Post-eBay, But Wall Street's Unhappy

Why did PayPal shares fall?

In a report dated Oct. 28, Jefferies analyst Jason Kupferberg said he was surprised that PayPal stock fell after earnings were reported. Overall, he saw the company’s earnings report as being positive. He believes the very slight miss on revenue was due to incremental pressure from the strong U.S. dollar, which he also thinks was why PayPal management did not provide quarterly guidance.

Revenue came in at $2.26 billion, just missing the consensus estimate of $2.27 billion but rising 14.6% on a reported basis. Kupferberg noted that the currency-adjusted growth rate as 19%, which he said was “very robust.” He added that the main driver was the in-line total payment growth of 19.9% and 3.24% take rate. Adjusted earnings were 31 cents per share, beating Wall Street’s estimate of 29 cents per share.

PayPal’s customer engagement on the rise

PayPal said it added 4 million active customer accounts during the quarter, which brought the total to 173 million. The company also said payment transactions per user climbed 12% compared to last year to 27, which indicates that customer engagement is on the rise.

The transaction margin was about what he had expected at 62.3%, while operating expenses were slightly lower than he had been projecting. As a result, the 19.9% adjusted operating margin beat his estimate by 135 basis points.

Looking to PayPal’s fourth quarter

Kupferberg warned that PayPal is likely experiencing similar currency headwinds during the current quarter even though thus far, currency trends have been improving. The reason is because he thinks PayPal’s hedge benefits will probably be less. Currencies are expected to result in a headwind of 300 to 400 basis points on revenue, compared to the previous expectation of about 300 basis points.

He wasn’t surprise that company management said they’re comfortable with the high end of their full year guidance range. PayPal expects revenue to grow by 15% to 18% and earnings to be between $1.23 and $1.27 per share.

In the medium term, management expects annual total payment volume to grow in the mid-20% range in constant currency. On the top line, they expect 15% growth in constant currency. They project annual operating margins to either remain stable or grow slightly.

The Jefferies team maintained their $44 per share price target and Buy rating on PayPal following Wednesday night’s earnings report. They believe the company’s “scarcity value” will warrant a higher multiple than most other payments processor stocks and think execution following the spinoff from eBay will become a catalyst over the next few quarters.