Paypal Holdings Inc Slips After Earnings

PayPal has released its first earnings report since its July earnings report and being spun off from eBay. The company beat estimates, coming in at adjusted earnings of 31 cents per share and $2.26 billion in revenue. Analysts had been looking for earnings of 29 cents per share and $2.27 billion in revenue. In the same quarter last year, the company reported adjusted earnings of 24 cents per share and revenue of $1.97 billion (as a subsidiary of eBay).

PayPal posts solid growth

PayPal’s revenue grew 15% on a reported basis and 19% on a currency neutral, non-GAAP pro forma basis to set a new third quarter record. GAAP earnings grew 18% to 25 cents per share.

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The company said it gained market share during the third quarter with a 27% increase in total payment volume on a currency neutral basis, bringing it to $70 billion. Merchant Services total payment volume rose 34% and made up 80% of payment volume. PayPal’s mobile transactions grew 38% to 345 million during the quarter.

PayPal added 4 million active customers, a 2.4% increase, bringing the total to 173 million.

PayPal guidance

One area some analysts were concerned about was guidance for the December quarter. BTIG’s Mark Palmer questioned whether PayPal shares could react positively at all if management didn’t reiterate their previously provided full year guidance. He suggested that if the payments processor cut guidance, then it could suggest that the competitive concerns are actually real.

On Sept. 17, PayPal CEO Dan Schulman said they stood “firmly behind” their guidance for revenue growth of between 15% and 18% on a currency neutral basis. The company also said it expects to add between 3 million and 5 million users per quarter and projects steady quarterly growth in the amount of revenue per user and the number of transactions per user.

Tonight management confirmed this guidance again and added a guide for GAAP earnings of between 94 cents and 98 cents per share and non-GAAP earnings of between $1.23 and $1.27 per share for the full year.

When will PayPal benefit from eBay spin?

The debate will now be when PayPal can benefit from the spinoff from ex-parent company eBay, which also did well during the September quarter. The online auction firm announced better than expected earnings earlier this month at 43 cents per share and $2.1 billion in revenue compared to the consensus estimates of 40 cents per share and $2.09 billion.

As of this writing, shares of PayPal fell by as much as 5.67% to $34.45 per share in after-hours trades.