Why PayPal Holdings Inc. Stock Popped Today
Image source: PayPal Holdings, Inc.
What happened
Shares of PayPal Holdings Inc. (NASDAQ: PYPL) rose 10.1% on Friday after the online payments company released strong third-quarter 2016 results on Thursday, then followed with encouraging forward guidance.
So what
Quarterly revenue grew 18% year over year (21% on a constant-currency basis), to $2.67 billion. Total payment volume (TPV) increased 25% year over year (28% at constant currency), to $87 billion, while total transactions processed rose 24%, to 1.5 billion. Active customer accounts increased 11%, to 192 million, which equates to 13% growth to 30 payments per active account on a trailing-12-month basis.
On the bottom line, PayPal's adjusted net income increased 13% year over year, to $425 million, and adjusted net income per share rose 14%, to $0.35.
By comparison -- and while we don't typically pay close attention to Wall Street's near-term demands -- analysts' consensus estimates predicted PayPal would achieve roughly the same earnings per share, but on slightly lower revenue of $2.65 billion.
Now what
For the current quarter, PayPal anticipates revenue will increase 14% to 17% year over year (16% to 19% at constant currency), to a range of $2.92 billion to $2.99 billion. That should result in fourth-quarter adjusted earnings per share of $0.40 to $0.42.
As such, for the full year PayPal now expects revenue of $10.78 billion to $10.85 billion (an increase on the bottom end from previous guidance of $10.75 billion to $10.85 billion), good for growth of 17% as reported, or 20% on a currency-neutral basis. That should result in full-year adjusted earnings per share of $1.48 to $1.50, again marking an increase on the low end as compared to previous guidance for 2016 adjusted EPS of $1.47 to $1.50.
Finally -- and perhaps most importantly -- PayPal offered an optimistic look at its profitability going forward, noting it now anticipates adjusted operating margin to be stable or higher over the next three years. This is particularly encouraging in light of PayPal's recently expanded partnership with MasterCard, which sent shares soaring last month but left some investors leery over the possible negative effects of the agreement on PayPal's margin profile going forward.
In the end, whether looking forward or back, there's little not to like about this solid report, and it's no surprise to see PayPal stock trading significantly higher today.
A secret billion-dollar stock opportunity The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.
Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends MasterCard and PayPal Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.