It was another victory march of an earnings report for PayPal as its Q1 results went out over the wires Wednesday (May 5). Earnings came in at $1.22, adjusted ahead of the $1.01 forecast prerelease, while revenue came in at $6.03 billion vs. $5.90 billion predicted by the experts. Total payment volume was also upbeat at $285 billion ahead of the $265 billion expected — representing 50 percent growth year-on-year.
Moreover, interest in PayPal keeps increasing — as the company added 14.5 million net new active accounts, bringing its total user base to 392 million.
Venmo also started the year strong, processing $51 billion in payments in the quarter, a 63 percent year-on-year increase.
And while other tech giants have come off of strong first quarters warning of upcoming softness in Q2 and beyond, PayPal anticipates the good times are set to continue in 2021 — as the firm is forecasting adding up to 55 million net new active accounts in 2021, with a roughly 30 percent rise in total payments volume on the way.
But PayPal’s story this earning season is about more than the seasonal scorecard issued four times a year to help investors keep track of how things are going.
PayPal President and CEO Dan Schulman’s interest of late has been in telling the tale of the connected economy and PayPal’s role in it as the super app connection point that concerns need. No one, he recently told Karen Webster, wants to have 40 or 50 apps on their phone, or take on the security liability that will necessarily follow that all of those apps are under a single password that is likely already for sale on the dark web. The world needs super apps to bring those disparate experiences together into something smooth and secure, which is what Schulman said PayPal can offer: consolidation of all of those financial instruments.
“And by the way, those financial instruments include rewards points, and the ability to choose buy now, pay later, or even use QR codes,” Schulman told Webster. “On the consumer side, we’re a consumer platform, and that has tremendous scale — we can add more and more services where people can live a lot of their digital lives on this app. For merchants who clearly want to be in the digital-first economy, this can be the operating system that enables them to move into a full, true, digital omnichannel experience.”
Among those varying range of services getting talked up on Schulamn’s call with investors Wednesday — crypto got a significant call out with Schulman saying that crypto users open their PayPal app daily, making it a key driver of engagement in the app.
Schulman also continued to boost PaPal’s forthcoming super-app ambitions, noting its intention to roll out a digital wallet” in the third quarter that will act as an “all-in-one, personalized app [that] will provide increasingly customized and unique shopping, financial services and payments experiences.”
Expanding payments experiences were also on display as PayPal’s expansion into the world of buy now, pay later (BNPL) also got airtime during Schulman’s call with analysts. In response to an analyst query on the program’s growth, Schulman noted PayPal has done nearly $1 billion in volume, with more than 14 million loans to 5 million unique borrowers via 330,000 merchants on the platform. Some 30,000 merchants, he noted, are presenting upstream from the checkout page to alert consumers of its presence. For every BNPL payment, merchants are enjoying a 16 percent reduction in cost per transaction.
And BNPL, he noted, is still in the very early stages in its rollout at PayPal, as the program is set for expansion into Australia in Q2 and deeper into Europe later in the year and that they are “enjoying meaningful scale” with their BNPL offering “even for a company of our size.”
PYMNTS/PayPal’s latest data on BNPL shows the sector still has a lot of room to grow. The data shows that 25 percent of consumers who have not used BNPL would be highly interested in using such solutions as part of digital wallets. Interest in this type of BNPL solution has also grown since the onset of the pandemic in March 2020, particularly among millennials. At that time, 32 percent of millennials indicated they would be highly interested in using BNPL services — a share that rose 38.1 percent by September, a 19 percent increase. The share jumped from 33.2 percent to 40 percent among bridge millennials. This suggests that consumers’ appetites for novel financing options grew as more consumers went online to do their shopping.
As for what’s next, PayPal forecasts adjusted earnings of $1.12 per share on $6.25 billion in revenue, slightly ahead of analyst forecast for next quarter of $1.10 in adjusted earnings per share on $6.16 billion in revenue.
For the full year, PayPal expects revenue to grow 20 percent to $25.75 billion, and the company called for adjusted earnings to grow 21 percent to $4.70.
For its part, the market liked what it heard — and PayPal tock was up 5 percent in after-hours trading.
Selected by EFXA