In spite of reporting a 25 percent rise in third-quarter earnings that came above expectations of analysts, PayPal shares dropped. Due to the uncertainties of the pandemic, elections and potential consumer spending, PayPal management acknowledged a “rapid approach to the digital economy” but gave a lower outlook for the next quarter.
PayPal (PYPL) shares have increased 73.6 percent since the beginning of the year but were down 5.5 percent on Monday after the company reported its third-quarter results and fourth quarter outlook.
For the quarter ended September 30, earnings per share rose to $1.07, which is higher than analysts’ average estimate of $0.94 and 75 percent when compared to the same quarter last year. The quarterly profit jumped from a year-ago profit of $462 million to $1.02 billion.
Total quarterly sales grew 25 percent to $5.46 billion, exceeding the analysts’ forecast of $5.43 billion.
In the third quarter, the company added 15.2 million new active accounts, down from 21.3 million in the second quarter marking the second-highest quarterly growth in the history of PayPal. As a result, the total number of active PayPal accounts was 361 million, an increase of 22 percent compared to the numbers in the previous year. In this sense, in the last two quarters, PayPal has added almost as many new accounts as it did in the whole year of 2019.
There was also a high degree of customer engagement highlighted by 4.0 billion payment transactions, up from 3.7 billion in the second quarter.
For the third quarter, gross payments amounted to $247 billion, which is 36 percent higher than the forecast of $232.3 billion by analysts.
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In the third quarter, Venmo, a service provider that allows people in the U.S. to transfer cash to each other via the app, handled $44 billion in payments, a rise of 61 percent in the same quarter of 2019.
The free cash flow of PayPal also increased to $3.97 billion by 43 percent. The payment service business is also introducing a program that enables clients directly pay from their PayPal accounts to purchase, store and sell cryptocurrencies.