Daily Review: All You Need to Know About PayPal's Earnings Results

An ever-innovative giant in P2P payments exceeds expectations another time with its Q3 earnings results. In Q3 2017, PayPal added 8.2 million net new active accounts – a record addition to the platform in a quarter. PayPal ended the quarter with approximately 70 million consumer accounts opted into One Touch, and approximately 6 million merchants accepting One Touch.

More importantly, the company continues to make aggressive strides to create a strong supportive network. Since early 2016, the company added 26 partnership agreements.

Image source: PayPal-Q3 2017 Investor Update

Key Takeaways from PayPal Holdings (PYPL) Earnings Results

Image source: PayPal-Q3 2017 Investor Update

  • Revenues of $3.239 billion (+21%, or 22% FX neutral basis) beat consensus of $3.178 billion and guidance of $3.140-$3.190 billion.
  • EPS of $0.46 beat consensus of $0.43 and guidance of $0.42-$0.44.
  • Early 2018 guidance above consensus. Management provided an initial outlook for FY18, calling for 20% growth in net revenue and non-GAAP operating income, implying flat operating margins.
  • Management views mid to high single-digit growth in operating expenses in 2018, after adjusting for expenses associated with two recent acquisitions (TIO and Swift Financial).
  • The biggest surprise was guidance on funding costs. Transaction expense was 97 bps, versus 100 bps last quarter and below the 100 bps expectation.
  • Management viewed 97 bps (+/- a few bps) as a sustainable level going forward, which was an unexpected surprise.
  • Transaction and loan losses were uncharacteristically high, worth monitoring in light of PayPal’s growing consumer lending book.
  • Guidance and estimates: FY17 net revenue guidance was raised to $12.920- $12.980 billion (19-20%, or 20-21% FX neutral), while FY17 non-GAAP EPS guidance was increased to $1.86-$1.88 (24-25%). The company is increasing its EPS to FY17 $1.89, FY18 $2.30, and FY19 $2.70. Increasing PT to $64, from $50 and maintaining neutral rating.

Read more.

Bonus Updates

Chinese FinTech company Qudian spikes nearly 40% in IPO

Qudian, an online small credit provider from China went public on the New York Stock Exchange Wednesday morning.

The Alibaba-backed China-based company, which was founded by 34-year-old Min Luo, targets China's younger and underserved markets with small loans via its mobile app. This is great news for FinTech in general and lending startups in particular.

Qudian, raised $900 million from the IPO, making it one of the largest initial public offerings of a Chinese company in the US this year.

Read more.

Singapore Moves Forward With Blockchain-Powered Interbank Payments Project

The software prototypes of three different models for decentralized interbank payment and settlements have been successfully developed by the blockchain consortium led by the Monetary Authority of Singapore (MAS), the city-state’s central bank and financial regulator, and the Association of Banks in Singapore (ABS).

The project, conducted together with 11 financial institutions and five technology companies, is the Phase 2 of Project Ubin, which explored the use of distributed ledger technology (DLT) for clearing and settlement of payments and securities.

Project Ubin was triggered in late-2016 with an aim to better understand blockchain and its potential benefits through practical experimentation. MAS has said that digital central bank issued tokens could enable the development of simpler to use and more efficient alternatives to today’s systems.

In Singapore, OCBC Bank, HSBC, and MUFG are already working on a KYC blockchain project to eliminate the duplicity of KYC processes and provide more convenience to customers and efficiency across the banks.

In trade finance, DBS Bank and Standard Chartered Bank are currently exploring the use of blockchain to prevent the problem of duplicate invoicing while preserving client confidentiality.

Read more.