PayPal shares drop 13% despite better-than-expected earnings

PayPal Holdings Inc. today posted better-than-expected fourth-quarter earnings, but reported payment volume growth that fell short of expectations, and its shares dropped 13% on the results.

PayPal operates one of the world’s most popular online payment platforms. It’s also active in several adjacent segments of the financial technology market. The company offers the mobile payment app Venmo with similar features as part of its flagship payment processing platform, as well as services that enable consumers to make e-commerce purchases quickly. 

The company also has a second lineup of financial services geared toward businesses. It provides loans, corporate debit cards and a service for centrally managing e-commerce deliveries. Beyond the online payment market, the company offers credit card readers and accompanying software for brick-and-mortar stores.

PayPal ended the fourth quarter ended Dec. 31 with sales of $8.37 billion, a 4% increase over the same time a year earlier. Analysts surveyed by the London Stock Exchange were expecting $8.26 billion.

Its total payment volume, a metric that tracks the cumulative dollar value of its users’ transactions, reached $437.8 billion in the fourth quarter. That sum represents a year-over-year improvement of 7%. But analysts were looking for faster growth, with the consensus estimate forecasting slightly higher total payment volume of $438.2 billion.

The value of the transactions that PayPal processes is a yardstick for measuring its services’ popularity among consumers. It’s possible the selloff in the company’s shares was driven by investor concerns about user base growth.

The payment volume was dragged down by its unbranded transaction processing business. The business includes payment services that don’t display PayPal branding in their interface. Those services accounted for just 2% of the company’s total payment volume in the fourth quarter, down from 29% a year earlier. 

PayPal’s Venmo consumer payment app, in contrast, saw user activity increase during the fourth quarter. The app’s Pay with Venmo payment feature logged a more than 20% jump in monthly active users. As a result, its share of PayPal’s total transaction volume grew from 8% to 10% in the last three months of 2024.

“The improvements we made to branded checkout, peer-to-peer and Venmo, plus the progress we made on our price-to-value strategy, are beginning to show up in our results,” said Chief Executive Officer Alex Chriss.

PayPal closed the fourth quarter with adjusted net income of $1.2 billion. That’s less than the $1.23 billion it reported a year earlier, but was enough to top the consensus estimate. The company delivered adjusted earnings of $1.19 per share, whereas analysts had expected $1.12.

For the current quarter, it’s forecasting adjusted earnings of $1.15 to $1.17 per share, ahead of the $1.13 consensus estimate. Its full-year profit projection for 2025 likewise topped market expectations.

PayPal plans to launch multiple new products this year to drive revenue growth. It launched several services in 2024 including Fastlane, a tool designed to speed up e-commerce purchases. It enables users to enter their payment details once and then have PayPal automatically autofill the data into Fastlane-powered e-commerce websites. 

Photo: PayPal

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