EmailOffsetting flat volume growth in the company’s eBay
Marketplace (EBAY 33.12, -0.96, -2.82%) segment, PayPal’s (PYPL 89.06, -3.36,
-3.64%) Venmo business turned in a solid fourth quarter, but just so-so
guidance seems to be keeping most investors waiting in the wings for now.
Specifically, Venmo growth continued apace as 78% growth in
the third quarter was cemented with 80% growth in the fourth quarter. All told,
Venmo processed approximately $19 bln of total payment volume (TPV) in the
period and wrapped $62 bln of TPV on the year. This growth offset weakness in
PayPal’s eBay Marketplaces segment, which saw flat volumes (down sequentially
from 3% growth in the third quarter).
You’ll recall that on Tuesday evening, eBay reported in-line
Q4 revenues of its own on shrinking gross merchandise volume (GMV). PayPal’s
sales from its old parent company, eBay, have been steadily shrinking over the
past few years. In the fourth quarter, PayPal revealed that TPV from eBay’s
Marketplace represented just 10% of overall TPV, down from 13% from a year ago.
Elsewhere, Person-to-Person (P2P) volume grew 46% to more
than $39 bln and represented 24% of TPV in the fourth quarter. Furthermore,
strong mobile engagement on PayPal’s platform contributed to about $67 bln in
mobile payment volume in the fourth quarter, growing about 40% compared to last
year. In the fourth quarter, mobile payment volume represented 41% of overall
TPV.
All told, PayPal processed $164 bln in TPV in the fourth
quarter, representing growth of 23%, or 25% on an FX-neutral basis. The company
reported fourth quarter earnings per share (EPS) of $0.69 on net revenue growth
of 13% to $4.23 bln.
Results were decent given PayPal’s increasing operating
expenses. Fourth quarter total operating expenses grew 25% to about $3.63 bln.
What’s more, loan loss ballooned to $340 mln, up 750% from $40 mln this time
last year.
Part of the increased expenses can be explained by PayPal’s
13.8 mln net new active accounts added in the quarter, versus an increase of
8.7 mln a year ago. Results were helped by 2.9 mln net new active accounts
added from the acquisitions of Hyperwallet and iZettle.
Looking ahead, PayPal sees first quarter revenue growth of
11-12% at current spot rates and 11-13% on an FX-neutral basis, to a range of
$4.08-4.13 bln. PayPal expects non-GAAP EPS in the first quarter in the range
of $0.66-0.68.
The company also gave expectations for the full year 2019;
PayPal expects revenue growth of 16-17% at current spot rates and on an
FX-neutral basis, to a range of $17.850-18.100 bln. The company guided for FY19
non-GAAP EPS of $2.84-2.91. Additionally, management offered that Venmo card
continues to gain significant traction and that instant transfer revenues
continue to increase, and as a result, Venmo initiatives have produced a
revenue run rate going into 2019 that now exceeds $200 mln. What’s more, the
company’s Venmo service is gaining traction with growing food ordering service
industry giants GrubHub (GRUB 79.56, -0.39, -0.49%) and Uber Eats.
It seems that PayPal has found a solution to the shrinking
eBay business: Venmo. Just how much the Venmo business can scale is up to the
industries it penetrates, but with inroads into the rapidly expanding food
ordering services market, it seems that PayPal has already found its golden
goose.
than one year.
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