PayPal’s Record Quarter Is Not Enough For Investors

PayPal Holdings, Inc. (NASDAQ: PYPL) reported third-quarter financial results after the markets closed on Monday. The firm said that it had $1.07 in earnings per share (EPS) and $5.46 billion in revenue, compared with consensus estimates that called for $0.94 in EPS on $5.43 billion in revenue. The same period from last year had $0.61 in EPS and $4.38 billion in revenue.

The company recorded its strongest quarter ever in terms of Total Payment Volume (TPV) which increased 38% year over year to $247 billion, or an increase of 36% on a currency-neutral basis. Merchant Services volume grew 40%. Venmo processed about $44 billion in TPV, an increase of 61%.

At the same time, PayPal added 15.2 million Net New Active Accounts (NNAA) in the quarter, ending with 361 active accounts. Also, there were 4.0 billion payment transactions in the quarter, an increase of 30%.

Note that there was an average of 40.1 payment transactions per active account on a trailing twelve-month basis, which was an increase of 1% from the third quarter of 2019. Adjusting for the acquisition of Honey in January 2020, there was an average of 41.7 payment transactions per active account.

On the books, cash, cash equivalents, and investments totaled $17.6 billion at the end of the quarter. The company generated cash flow from operations of $720 million, a decrease of 34% year over year. Free cash flow dropped by 48% year over year to $479 million.

PayPal stock closed Monday at $187.76, with a 52-week range of $82.07 to $215.83. The consensus analyst price target is $223.71. Following the announcement, the stock was down 4% at $180.38 in the after-hours session.

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