In this article, PayPal reported better-than-expected fourth-quarter results on Tuesday and issued guidance that also topped analysts’ expectations. The shares slid more than 9% in Tuesday morning trading.
For the first quarter, PayPal expects adjusted earnings per share of $1.15 to $1.17, which is higher than the average analyst estimate of $1.13, though adjusted net income fell 1.9% to $1.21 billion. Earnings for the year will come in at $4.95 to $5.10 a share, topping the $4.90 average estimate, according to LSEG.
PayPal also announced a new $15 billion share buyback program and expects to make around $6 billion in repurchases in 2025. Revenue increased about 4% in the quarter from $8.03 billion a year ago.
Total payment volume was just short of estimates, coming in at $437.8 billion for the fourth quarter, versus the $438.2 billion analysts projected. Unbranded payment volume declined to 2% from 29% a year earlier as the company continues to pursue a price-to-value strategy. Chief Financial Officer Jamie Miller said they expect similar dynamics in the next few quarters and anticipate renegotiations with existing customers to be a revenue growth headwind in 2025.
While PayPal’s take rate slipped to 1.91% from 1.96% a year earlier, transaction margin rose to 47% from 45.8%. The company anticipates growth of 4% to 5% in transaction margin dollars in 2025 to $15.2 billion to $15.4 billion.
PayPal’s stock is up 43% in the past year. CEO Alex Chriss, who joined the company in September 2023, is focusing on profitable growth and better monetizing key acquisitions like Braintree and Venmo. Venmo’s total payment volume rose 10% in the quarter from a year earlier.
Chriss highlighted the importance of Venmo’s debit card and Pay With Venmo for monetization. The company added 8.8 million active accounts last year. Solutions like buy now, pay later have helped PayPal expand its share of wallet, with BNPL customers spending 30% more on average.
One of Chriss’ strategies to address the deteriorating margin was to offer merchants increased value-added services, such as Fastlane, a one-click payment option for online sales. In 2024, branded checkout volume rose more than 6%, and PayPal Everywhere, offering 5% cash back for using a PayPal debit card within the mobile app, was launched.
“The improvements we made to branded checkout, peer-to-peer, and Venmo, plus the progress we made on our price-to-value strategy, are beginning to show up in our results,” Chriss said in the earnings statement.
