PayPal Holdings Inc (PYPL) stock is soaring today, tacking on 7% gains after the payment platform served up impressive revenue and earnings beats for the fourth quarter.
Meanwhile eBay (EBAY), PayPal’s former parent company, is seeing its shares take a nosedive — off 13% in mid-day trading.
You know what they say: The greatest revenge is success. And PayPal stock, it would seem, is well on the way to being successful. That certainly comes as a relief to investors, who have seen PayPal shares fall 8% (even after today’s gains) since spinning off from eBay back in July.
At the very least, PayPal’s strong Q4 results should restore confidence in the stock. And at the most, it should get investors to double down on their positions.
PYPL Stock: Q4 by the Numbers
PayPal revenue rose 16.6% year-over-year (21% excluding currency headwinds), coming in at $2.56 billion, $50 million above the consensus $2.51 billion figure. PYPL earnings per share also cleared estimates, clocking in at 36 cents and beating analyst expectations by two pennies.
In short, Wednesday’s earnings report shows that the idea — championed by famed activist investor Carl Icahn — to spin off the still-flourishing PYPL from its lackluster parent eBay to unlock growth opportunities, wasn’t so harebrained after all.
As if top- and bottom-line beats weren’t good enough, investors got a further dose of good news as the board of directors approved a $2 billion buyback program. That represents about 5% of the company’s market cap — not an insignificant sum.
In other words, PayPal insiders think PayPal stock is cheap, and they’re not afraid to act on it.
“We have proven our ability to generate cash, and this share repurchase authorization demonstrates our confidence in our strategic plan and long-term growth,” said PayPal CFO John Rainey in the company’s press release.
I would have confidence too, after last quarter’s results.
PayPal gained market share in the fourth quarter, growing total payment volume by 29% year-over-year to $82 billion, not including foreign exchange fluctuations. That was faster than e-commerce grew as a whole. And mobile payment volume soared 45% to $20 billion.
Active customer accounts grew 11% year-over-year to 179 million, with a record 6.6 million users signed up in Q4. PYPL stock owners can also celebrate the fact that payment transactions rose 25% year-over-year.
Also, active customers tend to be really, really active. The average payment transactions per active customer clocked in at 27.5, up 12% from 24.5 a year ago.
Going forward, social payments platform Venmo is probably the most exciting growth story for PayPal stock. Although its TPV of $2.5 billion represents just a fraction of PayPal’s total TPV, that number was up 174% year-over-year. Personally, I use Venmo several times a week to do things like pay back friends for calzones and remind roommates of bills I’ve paid.
Taken altogether, there’s not much of a reason to be negative on PayPal stock. I expect the stock to recover from its post-spinoff tumble and continue growing.
As for eBay? I wouldn’t bet on it.
As of this writing, John Divine was long PYPL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
