The shares of PayPal reportedly surged after Venmo, the application that was purchased by the company in 2012 showed signs that it would become a moneymaker.
The shares of the company rose by 9% last Friday after it beat the expectations on its revenue and earnings performance. It also came after it made positive announcement about Venmo, the company’s peer-to-peer app. Its stocks reportedly reached a high that came in above $86 and went up with over 26% on a yearly outlook.
Earlier on Thursday, the payments company reported its earnings for the third-quarter and the report beat the expectations of Wall Street analysts even though its payment volumes was a little below the estimates. In addition, PayPal went ahead to raise its fourth-quarter guidance as well as its full-year guidance.
Reports indicate that Venmo actually had struggles contributing to the bottom line of PayPal in the past, but it recorded a bright performance in the third quarter as its payment volumes soared by 78%.
The surge in turn brought the volume to $17 billion. Although that number accounts for a little fraction of the parent’s company total volume of $143 billion, the CEO of PayPal, Dan Schulman told analysts that the sign was an encouraging one.
Schulman highlighted a considerable growth in the app’s money making ability. According to him, the monetization efforts of the company has started progressing to a tipping stage.
The CEO stated that 24 percent of the social application’s users have already participated in what he referred to as monetizable action. The number was up from the 17 percent recorded in the second quarter of the year and the 13 percent recorded in May.
PayPal stated that in September alone, it processed instant transfer of over $1 billion on Venmo. That was from users who paid a specific fee to instantly transfer money out of their Venmo balance directly to their respective bank accounts.
In addition, the Venmo card also witnessed growth. Venmo cards are physical debit cards that are linked to Venmo accounts. The debit card was unveiled by PayPal this summer. The card grew with nearly 320 percent on a monthly outlook in August through September.
According to Schulman, “Pay with Venmo” option which is the payment option on apps and websites also witnessed an increase in the monthly users by nearly 185 percent over the same period. Venmo also recorded a 300% surge for Uber as well as Uber Eats also during the same period.
On Friday, BTIG reportedly upgraded the company’s stock from neutral to buy and gave it a 95 dollars price target. It told clients that the monetization process of Venmo had moved the company from the sidelines.
Mark Palmer, a BTIG analyst stated that a more attractive aspect of PayPal’s third quarter report was in the progress it made during that quarter in the monetization of Venmo.
Palmer noted that it was a very important initiative from the perspective of the valuation of the stock. The importance was because the future estimates of a lot of investors of the stock is often based on the success or otherwise of the monetization effort.
The debit card efforts and the Pay with Venmo are quite new initiatives and analysts have noted that there is a likelihood that the company is increasing its revenue from a small base.
However, this early momentum is quite encouraging considering the fact that the app is deemed to be one of the major growth catalysts of the company’s shares. The user base of Venmo is deemed loyal but a number of analysts have expressed concerns that the monetization efforts are moving in a slow manner.
PayPal Partnership Expansion
During the company’s earning call, the executives of the company explained the ongoing transition of eBay to a management of its payments. Schulman said that the 20 million dollars volume that eBay began managing last month had not in any way impacted PayPal’s numbers.
The past quarter was reportedly the company’s best in terms of its total new active users. Schulman said that it was partly due to the company’s partnerships and new products.
The payments company last week announced that it would be expanding its partnership with American Express and it also started a fresh partnership with Walmart Inc earlier this month.