Stocks of both PayPal (NASDAQ: PYPL) and Visa (NYSE: V) moved down since their last respective income report on Wednesday. At first sight, those two companies released solid figures, so what is the reason for potential concerns? Read further, if you want to find some details.
PayPal brought $0.58 in modified earnings per share on nearly $4 billion in gross revenue. Both estimations moved over the Zacks Consensus Estimates, growing 23% and 28% on a year over year foundation.
PayPal got 7.7 million active user accounts, and 18 percents of these are net new active accounts. The company also noted a significant 28% growth in payment transactions to around 2.3 billion.
This classifies with a 29 percent rise in complete payment volume to around $139 billion. The company bought a payment app Venmo in 2014, and it recorded an exceptional 78% year over year growth in total payment transaction to $14 billion.
PayPal also released 4 acquisitions in this quarter. The Hyperwallet, Jetlore, Simility, and iZettle takeovers of $2.4 billion in total. iZettle was certainly the biggest acquisition among these four, and PayPal gave $2.2 billion for that company. The purchase will finish in the third quarter and PayPal wants to get more exposure to Latin America and European markets with it. Also, iZettle might be a good ally in the struggle with competition such as Square Inc (NYSE: SQ).
Still, this positive news did not affect PayPal stock too much and it finished down 2.5% on Thursday with a new fall of 4.6% on Friday afternoon. The company’s third-quarter income report probably played a role in the loss. PayPal’s management team pointed out Q3 revenues between $3.61 and $3.67 billion. Although these drops are in compliance with the Zacks Consensus Estimate of around $3.65 billion, it did not satisfy expectations of some analysts.
A second investor worry is connected with the firm’s decision to approve ten billion of U.S dollars in stock buybacks. Usually, that is a good move which returns value back to shareholders, but in the case of this company, it is considered as a sign that PayPal has too much money, and not know what to do with it. Investors would maybe like to see the higher level of reinvestments in operations.
Bill Ready, a Chief Operating Officer in the firm, explained on PayPal’s conference that some shareholders and investors did not correctly understand the result of that decision. Regardless of the fact that his main task is to say similar things, this definitely sounded like a correct and truthful statement. PayPal is going to continue with leveraging strategic partnerships with Mastercard (NYSE: MA), Visa (NYSE: V), Facebook (NASDAQ: FB), Alibaba (NYSE: BABA) as well as with big banks, to expand its global activities and attract the higher number of users.
Visa announced modified earning of around $1.20 per share on operating income of $5.2 billion in total. Both estimations easily exceeded the Zacks Consensus Estimates and recorded 39 percent and 1.5 percent year over year growth, respectively.
The company’s main business drivers were nice growth in processed transactions, border volume, and payment volume. Visa was supported by positive user feelings and good exchange rates, moving to greater overall purchase activity.
The company’s reports do not include $600 million litigation anticipation, and many think it is probably an arrangement with merchants about a lawsuit including payment rates. Visa announced that the deposits have almost the same effect on the EPS growth as re-purchasing the firm’s class A common shares.
Having that on a mind, investors and shareholders should be more than satisfied, right? The company’s stock movement showed different, though. It traded 2 percent lower of the Wednesday’s closing price closing broadside on Thursday. Next afternoon, the stock dropped down again for another 1.9 percent, so the bad trend continued.
Cross-border volume was slightly lower with growth on an annual basis. It was mostly because of a strong US currency, which moved up 5% in the second quarter. That was the biggest boost since the end of 2016. This cut the spending of foreigners in America, tanking shareholder fears about the dollars as a risk.
But Visa stays well-positioned for further rise. The firm edited the yearly stock report, now expecting modified income to set up at the low 30s per share in comparison with the earlier levels in the high 20s. The company is also focusing on growing exposure in Europe, a continent where cash is still a mostly main form of payment.
This firm is selling shares at an all-time high, and a small pullback a few days ago could just serve as a tool of shareholders deciding to pay out their gains. The stock of Visa has moved up 43% in the last twelve months and closely 25% year to date. The company stands very well and makes a historical success. It has not missed the growth expectations in years. If the trend continues in the future, then the shareholders will be more than satisfied.