PayPal Exceeds Expectations Yet Sees Stock Decline Despite Positive Outlook

PayPal has reported stronger-than-expected financial results for both the fourth quarter and the entirety of 2024, surpassing market analysts' predictions. Despite this positive performance, the company's stock has experienced a downturn following the announcement.

According to PayPal, the platform now boasts 434 million accounts, with 229 million users actively engaging with their accounts at least once a month. This marks a two percent increase year-over-year in both active accounts and monthly usage. However, the total number of transactions fell by three percent in the fourth quarter compared to 2023, totaling 6.6 billion transactions. Nevertheless, the average number of transactions per account rose by three percent over the year, reaching 60.6 transactions per account.

In terms of transaction volume, PayPal reported a seven percent increase in the fourth quarter, amounting to $437.8 billion, and a ten percent rise for the entire year, reaching $1.68 trillion. The company's revenue from transaction fees in the last quarter rose by four percent to $8.4 billion. However, as noted by CNBC, the transaction fee rate has slightly decreased from 1.96 percent in the previous year to 1.91 percent.

The increase in PayPal's revenue can be attributed in part to its subsidiaries, Braintree and Venmo. The transaction margin derived from revenue also increased by seven percent to $3.9 billion, although PayPal's operating income fell by 17 percent to $1.4 billion during the fourth quarter. Overall, PayPal's total revenue for 2024 rose by seven percent to $31.8 billion, with the transaction margin increasing correspondingly to $14.7 billion. The operating income for the year increased by six percent to $5.3 billion, largely thanks to the contributions from Braintree, which is utilized by Meta Platforms for credit card processing.

Venmo, the mobile payment service exclusive to the United States and a part of PayPal since 2013, saw a ten percent increase in transaction volume in the fourth quarter, driven by the addition of more merchants like Starbucks and Ticketmaster who now accept Venmo as a payment option. Nevertheless, PayPal's revenue from eBay declined by one percent, and the growth in payment processing for other providers reduced to two percent, a significant drop from the 29 percent increase recorded the previous year.

Looking ahead to the first quarter of 2025, PayPal anticipates a transaction margin between $3.6 billion and $3.65 billion, representing a four to five percent increase compared to the same timeframe last year. Newly appointed CEO Alex Chriss aims to bolster Venmo's revenue while emphasizing efficiency and effectiveness within the organization. PayPal plans to concentrate its resources on key initiatives, particularly those related to Venmo.

While the PayPal stock has appreciated approximately 30 percent in the past year, it has recently seen a decline of about nine percent following the release of these latest financial figures.