PayPal’s Venmo Isn’t Enough to Drive Payment Volume Growth

(Bloomberg) -- PayPal Holdings Inc. released first quarter results that showed rising sales and profit but a decline in payment volume growth, a closely watched measure of the company's popularity among customers.

The San Jose, California-based met analysts' expectations for revenue and exceeded them for per-share earnings last quarter. On a conference call after the report, PayPal said it was pleased with plans to make money from Venmo app, although it didn't offer specifics.

The mixed picture gave investors little reason to boost the shares, which is near a record high. Shares of PayPal have risen 28 percent this year, as analysts expected the company would continue reaping benefits from a strong e-commerce market and hopes that Venmo will soon turn a profit.

But online sales have not been enough to offset EBay Inc.'s waning reliance on the payment processor, which was once a subsidiary of the online auction site. PayPal's stock fell as much as 3.14 percent in extended trading on Wednesday before recovering to its $107 closing price.

PayPal reported adjusted earnings per share of 78 cents for the first three months of the year, compared with 52 cents the year before. The average analyst estimate was 68 cents. Revenue in the quarter was $4.13 billion, in line with estimates and 12 percent higher than the prior year.

For the first time, PayPal disclosed the number of people active on Venmo, or those who have made at least one transaction in the past 12 months: 40 million. Venmo is on pace to generate $300 million annually, with the company adding that the platform processed $21 billion of payments in the first quarter, up from $12 billion the year before

Even still, the growth rate in payment volume across the company's services slowed. The volume was $161 billion, a 22 percent increase from the year before. The growth rate was 23 percent in the previous quarter and 32 percent a year ago. PayPal expects to have 300 million active users across its properties by the end of the year.

To contact the reporter on this story: Julie Verhage in New York at jverhage2@bloomberg.net

To contact the editors responsible for this story: Mark Milian at mmilian@bloomberg.net, Molly Schuetz

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