PayPal (NASDAQ: PYPL) announced fiscal 2019 fourth quarter results that BEAT expectations.
Revenue came in at $4.96 billion, slightly ahead of the consensus estimate of $4.94 billion. The performance marked a 17% increase over the same period a year ago when revenues were $4.23 billion.
Adjusted earnings per share of $0.86 beat the consensus estimate of $0.83 by 4%. The company reported EPS of $0.69 in the same quarter of last year.
Full-year revenue increased 15% in 2019 over 2018 to $17.77 billion. This growth would have been closer to 18% absent the company’s sale of its domestic consumer credit receivables to Synchrony.
Earnings for the full-year increased 28% in 2019 matching the earnings growth from 2018. Both the full-year revenue and earnings numbers were company records. It also tacked on 14% more active user accounts to bring its total to 305 million accounts as of year end.
The company is forecasting revenue growth of 16% to 17% next quarter and 17% to 18% for all of 2020 after posting 17% growth in 2019.
TRANSACTION VOLUMES SEEING STRONG GROWTH
During the latest quarter PayPal processed 3.5 billion transactions totalling almost $200 billion. Total volumes grew 22%, Venmo volumes grew 56%, and Merchant Services volumes grew 25%. Although this was a deceleration from the third quarter’s 25% growth, it is still very strong growth.
It also saw customer engagement increase 10% to 40.6 transactions per active account. It all adds up to healthy growth in the uptake of PayPal’s convenient payment solutions.
Much of PayPal’s growth will come from the high flying One Touch product which has become the platform of choice for nearly 14 million merchants and over 170 million consumers. One Touch has a leadership position in the mobile payments space and there is plenty of opportunity for growth ahead. The company can leverage the Venmo money transfer platform to increase its presence in many overseas markets through One Touch.
AGGRESSIVE M&A STRATEGY EXPANDING GLOBAL REACH
PayPal has been very active on the M&A front in recent months. It recently announced a mutually beneficial partnership with MercadoLibre to expand its commercial capabilities.
It also completed a deal to attain a 70% equity stake in GoPay to become the first foreign online payment platform in China. This gives it entry into the lucrative Chinese e-commerce market.
In November of last year it announced plans to acquire shopping rewards platform Honey for $4 billion, its largest acquisition yet. That deal closed earlier this month is expected to drive increased merchant sales.
Earlier this month it announced yet another strategic partnership with UnionPay to leverage its merchant and consumer capabilities in China.
After rising nearly 29% in 2019, PayPal’s stock is up another 7% this year while the industry is up 5%. This compares to a flat year-to-date return in the S&P 500 index.
Although the eBay business is showing signs of a sustained deceleration and competitive risks from Square and others are challenges, the company has multiple long-term growth catalysts ahead. Transaction volumes will likely continue to experience fast growth as global adoption of its digital payment solutions ramps.
PayPal is making smart acquisitions and astute partnerships to support the next wave of global growth. Nearsighted traders may interpret today’s numbers as a sign of slowing growth, but there appears to be plenty of room for strong global growth ahead as PayPal enters new high-growth markets and expands offerings in existing markets. Long-term investors interested in exposure to the rapidly growing digital commerce space should give serious consideration to PayPal.