PayPal Tops Estimates And Opens Doors To Massive Growth

PayPal Holdings, Inc., PYPL was expected to deliver a year-over-year increase in earnings and higher revenues during the third quarter that ended on September 30^th 2019. Not only that the pioneer of peer-to-peer did not disappoint but it managed to top Wall Street expectations by increasing its active userbase to 295 million users. This is a good year for Paypal as the company's shares have climbed 15% since the beginning of the year with a rise of 10% in the last 12 months. The share price surged during the final minutes of trading on Wednesday after the earnings were announced, reaching the price of $96.64.

Third Quarter Earnings Report

The digital payments company that is pioneer of peer transactions reported a net income of $462 million, up from previous quarter's $436 million. Revenues that rose 19% also exceeded expectations of $4.35 billion by reaching  $4.38 billion. In the same quarter last year, revenues amounted to $3.68 billion.

This was the very first time, the very first quarter that the company processed more than 1 billion transactions per month. Number of payment transactions per active account also rose 9%. This figure of 39.8 is also important because it measures consumer engagement. The company is adding merchants and growing its lead among digital wallet providers.. Its shares have gone up more than The S&P 500 this year.

Competitive Environment

Mastercard MA, Visa V and American Express AXP joined forces and just announced a competitor to PayPal and Apple Pay AAPL by launching a ‘payment button' that allows users to save their details on one place, eliminating the need to type 16-digit card numbers, codes and dates.Of course there's also Amazon.com, Inc. AMZN which gets a nice share of the online payment buzz with its Amazon Pay, the truth is that every other retailer like Walmart Inc. WMT is competing with the e-commerce giant thanks to Paypal.

Then there is the New York-based financial services company Payoneer which is very popular with freelancers all over the world due to a more favourable tax rate, but even in this case, people often opt for Paypal because they feel it's safer – what better sign of an effective brand image. So when it comes to differentiation – PayPal seems to have it covered.

The First Foreign Payment Platform To Get A License In China

With the recent PayPal's acquisition of GoPay that provides online and mobile transactions for e-commerce and aviation tourism industries, PayPal secured a big win. The company opened a door to massive expansion, especially considering how rapidly is the Chinese market growing.

Each single one of Paypal's competitors and any US financial firm would die to have a precious piece of this enormous pie, and many have been trying to do it for years. China's payments market is expected to grow over 96 trillion dollars by 2023 and PayPal secured its place in that storyline. Sounds like a goldmine, doesn't it? What's even more interesting is that this acquisition came at a very strange time during the increased tensions between the United States and China so it is even more surprising how PayPal managed to make such an ‘easy entry.

Outlook

With the demand for e-commerce growing consistently, there is plenty of room for the Chinese payment market to grow. On top of that, the number of active mobile payment users is expected to increase further and reach a massive figure 956 million by 2023. On the other hand, others find that its latest deal may not help the company all that much and that it will be just historic rather than record-breaking.

As for the fourth quarter that ends in December, the company expects revenue in the range of $4.89 billion to $4.95 billion and 17.70 billion to $17.76 billion for the full year, with the mid point being higher compared to previous estimates (17.6 billion to $17.8 billion). Full-year earnings are expected to be in the range of $3.06 to $3.08 per share. It definitely seems that the San Jose, California-based digital platform's initiatives are on track.

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