PayPal Reports Impressive Third-quarter Earnings Alongside Weak Fourth-quarter Guidance

Shares of online payments company PayPal dropped more than 5 percent in Thursday’s after-hours trading after the company reported weak guidance for the ongoing fourth quarter. The company, however, reported impressive earnings and revenue for the third quarter. 

PayPal reported earnings per share, ex-items, of $1.08 in the third quarter, beating analysts’ estimate of 96 cents, according to Refinitiv. Revenue for the third quarter came in at $6.85 billion, surpassing an estimate of $6.82 billion by analysts, according to Refinitiv.

The company said it expects revenue for the fourth quarter to come in at $7.38 billion, lower than the estimates of $7.74 billion by analysts, according to Refinitiv. The company increased EPS guidance for the full fiscal year, adding that it benefitted from “ongoing productivity initiatives.” It also expects to add between 8 million and 10 million net new active users in the fiscal year. The company’s CEO Daniel Schulman blamed “a challenging macro environment, slowing e-commerce trends, and an unpredictable holiday shopping season” for the company’s prudent forecast. “We think that e-commerce is going to be pretty muted in the fourth quarter,” he added.

Like many other companies, PayPal is also affected by the ongoing economic downturn that has forced companies to be strategic with their spending, policies, and hiring. The company had to cut down on its annual revenue growth forecast as it prepares for the economic downturn to continue. It also added that it does not expect much growth in its US e-commerce business in the fourth quarter.

PayPal said it expects $900 million in cost savings this year and at least $1.3 billion next year.

“Their cost-saving plans are taking hold but in the ultra-competitive payments world, market share gains don’t seem to be enough to placate investors,” Michael Ashley Schulman, Chief Investment Officer at Running Point Capital Advisors said.

PayPal also said that it is working with Apple to enhance its offerings for PayPal and Venmo. It said it is working on allowing merchants in the US to accept contactless payments through their mobile wallets, and adding PayPal and Venmo network-branded credit and debit cards to the Apple Wallet.

Jack Dorsey-owned Block also reported impressive third-quarter earnings results. For the third quarter, the company reported adjusted earnings per share of $0.42, surpassing analysts’ estimate of $0.23, according to Refinitiv. Third-quarter revenue came in at $4.52 billion, beating analysts’ estimate of $4.49 billion, according to Refinitiv. It also reported a gross profit of $1.57 billion, up 38 percent from the $1.13 billion reported a year earlier. It also surpassed Wall Street expectations of $1.53 billion.