PayPal Reports Rise in Profits, Weak Transaction Volumes

Payment processor PayPal Holdings Inc, spun off from eBay Inc reported quarterly revenue slightly below analysts' expectations as a strong dollar hurt its transaction volumes in China and Europe.

Shares of PayPal, which listed for the second time on the Nasdaq in July, fell 5.6 percent in extended trading on Wednesday.

PayPal's third-quarter revenue rose about 14 percent to $2.26 billion (roughly Rs. 14,736 crores), nearly half of which came from markets outside the United States.

Excluding the impact of a strong dollar, revenue rose 19 percent, but missed the average analyst estimate of $2.27 billion (roughly Rs. 14,801 crores), according to Thomson Reuters I/B/E/S.

"I think that the foreign exchange impact has been larger than expected," Susquehanna Financial Group analyst James Friedman said.

PayPal said it expected the dollar to have a bigger impact on its 2015 revenue than previously anticipated. The company forecast a growth of 15-18 percent in full-year revenue, excluding the impact of a strong dollar.

Wedbush Securities analyst Gil Luria also attributed the fall in PayPal's shares to likely high investor expectations after strong results from eBay.

PayPal said growth in its international total payment volumes was hurt somewhat because of weakness in China and Europe.

"When Americans buy in China or Europeans buy in the United States, PayPal makes the highest rates. So when the dollar is strong, that weakens demand from Europe and supply from China," Luria said.

PayPal has also been facing fierce competition from payment processing startups such as Stripe Inc and Square Inc as well as Apple Inc's Apple Pay in a market it helped create.

Square, headed by Twitter Inc Chief Executive Jack Dorsey, filed for an IPO this month.

PayPal's transaction margin fell to 62.3 percent in the quarter ended Sept. 30 from 63.1 percent, a year earlier.

Active accounts increased 10 percent to 173 million, while total payment volume rose 20 percent to $69.74 billion (roughly Rs. 4,54,729 crores). The company's mobile transactions rose 38 percent to 345 million.

PayPal's net income increased 28.6 percent to $301 million (roughly Rs. 1,962 crores), or 25 cents per share.

Excluding items, the company earned 31 cents per share, handily beating the average analyst estimate of 29 cents.

PayPal's shares were trading at $34.60 after the bell.

© Thomson Reuters 2015