PayPal Shares Fell in A Divided Response to Profits and an Amazon Alliance

PayPal Group shares fell by as much as 5% after trade on Monday when the payment company announced it might not reach sales and profit estimates for the latest quarter. The corporation posted net revenue of USD 1.09 billion, or 92 cents per share, for its most recent fiscal quarter, which ended in September. After accounting for stock-based remuneration and other costs, the stock generated USD 1.11 per share, which was better than the previous year’s USD 1.07 per share and the analysts’ average projection of USD 1.07 per share. PayPal’s revenues for Q3 increased by 13% year on year to USD 6.18 billion. Experts had predicted USD 6.23 billion.

But it was undoubtedly PayPal’s dismal Q4 estimate that frightened investors the most: the company predicts USD 6.85 billion to USD 6.95 billion in sales, and USD 1.12 in adjusted profits per unit, both of which are much lower than what Wall Street anticipated. FactSet polled experts, who predicted sales of USD 7.24 billion and adjusted profits of USD 1.28 per share for the October – December quarter. However, the termination of stimulus funds and continued global supply difficulties may ruin the celebration. PayPal shares more than quadrupled in 2020, as the online payment giant benefited greatly from the pandemic’s surge in e-commerce activity.

However, the stock has been down 18% in the last three months and was down 2% as of 2021, as investors became concerned about the firm’s high valuation, which reached 64 times forecast earnings in February, and the probable purchase of social networking business Pinterest (PINS). PayPal then stated that it will not pursue the acquisition for the time being. On Monday, Venmo, PayPal’s peer-to-peer payment application, also unveiled a new agreement with Amazon.com (AMZN), under which consumers on Amazon’s e-commerce platform and mobile applications would be able to utilize Venmo as a payment alternative beginning next year. This agreement comes as PayPal braces for a future without its long-term e-commerce partner eBay.

PayPal was eventually bought by eBay in 2002, with whom they split from in 2015. Notwithstanding the separation, PayPal remained a leading payment processor for the worldwide online marketplace. However, eBay has been trying to break away from PayPal and its transferring merchants, to its own payment service since last year. PayPal reported that its volume of transactions on eBay marketplaces fell 45% in the last quarter and now accounts for less than 4% of its income. PayPal’s Venmo application, on the other side, has been fast expanding, with payment volume increasing 36 % each year to USD 60 billion in the most recent quarter. PayPal’s overall payment volume, including Venmo payments, topped USD 310 billion in Q3.