PayPal Holdings early Tuesday reported third-quarter earnings that topped estimates while revenue came in slightly below views. PayPal stock fell as December-quarter revenue guidance missed estimates amid re-pricing initiatives at mobile subsidiary Braintree.
In the quarter ending Sept. 30, PayPal earnings rose 22% to $1.20 on an adjusted basis. Revenue climbed 6% to $7.85 billion, the digital payments firm said.
Analysts polled by FactSet expected PayPal earnings of $1.07 a share on revenue of $7.88 billion.
Also, total payment volume (TPV) from merchant transactions rose 9% to $422.6 billion, in-line with estimates of $422.5 billion.
For the fourth quarter, PayPal said it expects revenue growth "in low single digits" and adjusted EPS in a range of $1.07 to $1.11 amid new product and marketing initiatives. Analysts had estimated Q4 adjusted EPS of $1.10 on revenue growth of 5% to $8.44 billion.
On the stock market today, PayPal stock fell 4.2% to near 80 in afternoon trading. Heading into the PayPal earnings report, shares had advanced 35% in 2024, hitting a 20-month high on Monday.
At Susquehanna, analyst James Friedman holds an upbeat view on PayPal stock. "We appreciate the consistency of new management to deliver transaction margin dollar growth, up 8% again this quarter," he said in a report. "Bear case weighing on the shares is that slowing revenue growth will pressure EPS for 2025. But Braintree again contributed to transaction margin growth and branded volumes remained strong and grew 6%, in line with Q2 print."
PayPal Stock: Braintree Strategy
Coming into the PayPal earnings report, analysts had debated the impact of recent price hikes at subsidiary Braintree. It processes transactions for Uber Technologies, AirBnB, Doordash, Spotify, Paymentus and others.
PayPal has raised prices when contracts come up for renewal, a move aimed at improving transaction margins and profitability. But the re-pricing initiatives may lower payment volumes and revenue in the near-term, analysts say. Braintree rivals Adyen and privately held Stripe could pick up more business.
"We're making solid progress on our initiative to price our services in a way that reflects the current value we bring to our merchants," said Chief Executive Alex Chriss on the earnings call with analysts. "This is now the second consecutive quarter in more than two years that Braintree is meaningfully contributing to transaction margin dollar growth. We're having very constructive conversations with our merchants focused on ways we can enable strategic growth opportunities that drive long-term upside for both of us."
Chriss added: "Sometimes that comes with a relook at our contracts and a relook at the partnership but I think we're bringing more to the table now. And so the conversations we're having with these merchants is we're innovating, we're bringing Fastlane, we're bringing ads platform. We're bringing additional value-added services that allow us to have a healthier, stronger conversation about where we're going."
PayPal Stock: Active Accounts Grow
Also, Chriss said PayPal expects Braintree payment volume and revenue to continue declining in 2025.
San Jose, Calif.-based PayPal has evolved from an online checkout button to a mobile phone and in-store payments provider. Meanwhile, competition has heated up with Apple, Square-parent Block and others.
In Q3, PayPal said active accounts climbed 1% from a year earlier to 432 million. It marked the first year-over-year increase since the second quarter of 2023. PayPal has focused on customers that use multiple products monthly.
Also, PayPal said it added one million new debit cards users after introducing a new loyalty rewards program in September.
While Q4 revenue guidance missed, PayPal hiked its full-year adjusted EPS and margin transaction outlook based on the Q3 beat.
PayPal Stock Buyback
PayPal said transaction margin dollars are expected to grow by a mid-single-digit percentage vs. prior guidance of low to mid-single digit growth.
Adjusted EPS is expected to grow in the high teens vs. prior guidance of low to mid-teens growth.
Meanwhile, PayPal repurchased $1.8 billion of its own stock in Q3.
Further, Chriss took the helm in late September 2023. He's been making big changes.
PayPal Stock Technical Ratings
Some analysts have been upbeat on the 2025 potential of PayPal's new "Fastlane" guest checkout. Fastlane doesn't require users to create PayPal accounts.
PayPal has announced Fastlane partnerships with Adyen, Fiserv and Global Payments. Also, PayPal has expanded ties with e-commerce firm Shopify.
"An investor day planned for late February will be a key catalyst as the Street seeks to better understand how PayPal sees the medium- and long-term financial profile of the business after incorporating greater organizational focus and its active innovation roadmap," said TD Cowen analyst Bryan Bergin in a report.
PYPL stock holds a Relative Strength Rating of 92 out of a best-possible 99, according to IBD Stock Check-up.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
