PayPal Shares Jump After Earnings Beat Expectations

Shares of PayPal exploded on Friday after the digital payments company reported financial results for the third quarter that beat expectations.

Both revenue and earnings came in higher than expected and it was revealed that Venmo saw an almost 80% jump in total payment volumes for the quarter to hit $17 billion. PayPal purchased Venmo from Braintree back in 2012.

That still makes up a fraction of PayPal’s total $143 billion in volume, but it’s an encouraging sign, said PayPal CEO Dan Schulman.

The Venmo card also saw a 320 percent month over month growth August to September.

Non-GAAP earnings for the three months ending in September climbed 26% from the same period last year to 58 cents a share. Analysts had been waiting for 54 cents a share. Revenue rose 13% to $3.68 billion. Total payment volumes were up 24% from last year to just over $143 billion.

“It seems repetitive but we don’t take it for granted; for three quarters in a row right now we’ve each quarter seen record net new active signing up to Venmo,” Schulman also said. “So not only are you seeing Venmo expand quite rapidly but the percent of people using the monetizable event is going up quite rapidly as well.”

BTIG analyst Mark Palmer upgraded PayPal from “neutral” to “buy” with a $95 price target and told clients that it was the “Venmo monetization process” that moved them “off the sidelines.”

“A more eye-catching aspect of PYPL’s 3Q18 report was the progress the company made during the quarter in monetizing Venmo, an important initiative with regard to the stock’s valuation inasmuch as many investors’ future estimates are predicted on the success of that monetization effort,” Palmer wrote.

TheStreet’s Eric Jhonsa wrote, “The revenue growth outlook compares favorably to a pre-earnings consensus for 16% dollar-based growth, particularly given the dollar’s recent strengthening, while the EPS outlook is slightly below a consensus for 21% growth.”

Disclaimer: We have no position in Paypal Holdings Inc. (NASDAQ: PYPL) and have not been compensated for this article.