Paypal (PYPL) Misses Out of the Gate as Take Rates Decline

PayPal (NASDAQ: PYPL) missed consensus revenue by 1% although EPS of $0.31 beat consensus of $0.29 as PYPL delivered 200bps of operating margin expansion. Total Payment Volume (TPV) in constant currency grew 27% as the take-rate declined to 3.24% from 3.39%. Even as the take rate declined, PYPL expanded operating margins 200bps y/y.

PYPL guided to the high-end of its 15-18% constant FX revenue guidance for ’15, which implies a ~1-2% deceleration in 4Q revenue growth vs. the 3Q.

Gene Munster from Piper Jaffray noted that PYPL will begin trials with pay-by-Venmo at select merchants with a more robust roll-out during ’16. PYPL will open up its engaged Venmo user base to PYPL merchants, which will include online, in-app and in-store. PYPL said that the Venmo take-rate charged to merchants will be similar to the rate on a PYPL transaction.

Reducing Revenue and Raising EPS estimates. Munster reduced his 15 revenue forecast given PYPL’s 3Q results and guidance to be in line with consensus but raised his ’15 adjusted EPS estimate from $1.26 to $1.28 due to higher forecasted margins. He has an Underweight rating and downside $30 price target on the stock due to long-term concerns around PYPL’s value position to consumers and merchants in an increasingly crowded mobile wallet/payments landscape.

For an analyst ratings summary and ratings history on PayPal click here. For more ratings news on PayPal click here.

Shares of PayPal closed at $36.52 yesterday.

You May Also Be Interested In

• Citi Upgrades United Microelectronics Corp (2303:TT) (UMC) to Buy 'with limited downside'
• Bunge (BG) PT Raised to $122 at Citi
• Compass Minerals International (CMP) PT Lowered to $15 at Deutsche Bank