What Will PayPal Do With Its Cash Pile?

PayPal (NASDAQ: PYPL) recently reported a strong quarter that topped estimates but its revenue outlook missed estimates.  

PayPal’s Financials

For the second quarter, PayPal reported revenue of $3.86 billion, up 23%. GAAP EPS was up 29% to $0.44 and non-GAAP EPS increased 28% to $0.58. Analysts were expecting earnings of $0.57 on revenue of $3.81 billion.

During the quarter, 7.7 million active accounts were added, with net new active accounts up 18% to reach 244 million. It recorded 2.3 billion payment transactions, up 28% and $139 billion in total payment volume (TPV), up 29%. Person-to-Person (P2P) volume grew 50% to more than $33 billion and represented approximately 24% of TPV in the quarter. Venmo, the company’s social payments platform, processed more than $14 billion of TPV, growing 78% over the same period last year.

Driven by strong mobile engagement on its platform, PayPal processed approximately $54 billion in mobile payment volume, up 49%. In the quarter, mobile payment volume represented 39% of overall TPV.

For the third quarter, PayPal expects revenue to grow 12%-13% to $3.62-$3.67 billion. GAAP EPS is expected in the range of $0.31-$0.34 and non-G-AP EPS is expected in the range of $0.53-$0.55. Analysts were expecting revenue guidance of $3.71 billion.

For the full year, PayPal raised its revenue and non-GAAP EPS guidance. It expects revenue to grow 17%-19% to $15.3-$15.5 billion. GAAP earnings per diluted share is expected in the range of $1.44 – $1.51 and non-GAAP earnings per diluted share in the range of $2.32 – $2.35.

PayPal’s Acquisitions

During the quarter, PayPal announced four strategic acquisitions.

In May 2018, PayPal announced the acquisition of Swedish mobile payments company iZettle for approximately $2.2 billion in cash, roughly double the expected valuation through a planned IPO. While PayPal is used by major retailers around the world, including Walmart and Best Buy, iZettle is focused more on small-to-medium-sized firms. With the acquisition of iZettle, PayPal plans to expand its in-store presence.