PayPal’s revenue falls short of investors’ high expectations

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Wall Street’s expectations for PayPal Holdings Inc. last quarter proved a little too optimistic. The company’s sales failed to meet analyst estimates, a rare miss after years of growth.

Revenue in the fourth quarter rose 13 percent to $4.23 billion. Analysts had projected $4.24 billion on average, marking the first time PayPal failed to exceed estimates in more than three years.

The San Jose, California-based company reported adjusted earnings per share of 69 cents for the last three months of the year. The average analyst estimate was 67 cents. PayPal maintained its outlook for 2019. It forecasts adjusted earnings per share of $2.84 to $2.91 and revenue growth of at least 16 percent.

Shares of the company were at an all-time high last week ahead of the quarterly report. At the close of trading Wednesday, PayPal was up 10 percent from the start of the year, with four-fifths of analysts who cover the stock rating it as a buy. Shares fell as much as 5.3 percent in extended trading on Wednesday following the earnings report.

Investors were “very bullish” at the start of the current quarter, Harshita Rawat, an analyst at Bernstein, wrote in a note to clients. She cited growth in the e-commerce market, optimism for Venmo and minimal exposure to China among the reasons Wall Street was positive on the stock.

Last year, PayPal began providing more details on Venmo. The mobile-payments service is a major source of user growth, though not a source of earnings, for PayPal. One attempt to wring profit from the business is through a Pay With Venmo button used by Uber and other apps. PayPal collects transaction fees, which are especially lucrative when customers use the cash balance in Venmo instead of a credit card.

Transactions on Venmo totaled $19 billion in the quarter, an increase of 80 percent from the same period a year ago. Across all services, PayPal handled $164 billion in payment volume in the fourth quarter, an increase of 23 percent.

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