PayPal Shares Soar 9% After the Success of Venmo App

PayPal-owned peer-to-peer mobile payment app, Venmo, is growing faster than ever and it has sent its parent company’s shares soaring 9 per cent after the third quarter earnings report showed unexpectedly higher revenues

PayPal’s giant’s stock is up 26 per cent in comparison to last year and shares hit an impressive $86 after it revealed third quarter earnings on Thursday

PayPal Q3 Earnings

The payment giant’s stock is up 26 per cent in comparison to last year and shares hit an impressive $86 after it revealed third quarter earnings on Thursday, reporting higher revenues than Wall Street’s expectations. Even though PayPal’s payment volumes weren’t as high as expected, the company has raised its profit estimation for the fourth quarter even higher.

Its mobile payment app, Venmo has had a particularly good quarter after failing to turn profits for past few years. The service generated over $17 billion, and experienced 78 per cent growth in its payment volume, which was an encouraging sign for its parent company, even though the amount is only a fraction of PayPal’s total payment volume of $143 billion.

Dan Schulman, the CEO of PayPal, told analysts over a conference call that the social app has a lot of potential for tangible growth and return even higher profits in the future. After a whopping 78 per cent growth in just a year, the company’s monetization efforts are finally ‘reaching a tipping point’, the CEO added. So far, the app has been able to take ‘monetizable action’ on over 24 per cent users. The figure was only 17 per cent in the second quarter and 13 per cent in the first. In just a month, the company was able to generate instant transaction volume of $1 billion in Venmo.

Venmo Monetization Process

Earlier this year, PayPal unveiled a physical debit card that can be linked to Venmo and used to make payments in restaurants, hotels and retail shops. Schulman revealed that the Venmo card experienced almost 320 per cent month-over-month growth in September.

The number of active users on Venmo’s mobile and web apps also jumped up to 185 per cent in the same month. The CEO added that transaction activity for services like Uber and Uber Eats also soared by a whopping 300 per cent from August to September.

BTIG wrote a note to clients on Friday saying that Venmo monetization process could bring up the company’s share prices even more in the fourth quarter. The capital marketing firm also increased PayPal’s price target to $95, upgrading its stock from neutral to buy. Analyst Mark Palmer from BTIG said that the most interesting aspect of PayPal’s third quarter earnings report was how much progress Venmo had made in just three months, eventually leading to a 9 per cent increase in the company’s share prices.

PayPal announced a partnership with Mastercard MA this year to come up with a debit card for Venmo users

Venmo’s History

In 2012 Venmo caught the attention of e-commerce company, Braintree, which saw potential in the personal finance platform and acquired it for $26.2 million. Just a year later, Venmo was sold once again, this time to the payment giant PayPal for $800 million.

Ever since, it has become one of the fastest growing mobile app in the United States for sharing money with friends and family.  The company went a step further this year and announced a partnership with Mastercard MA to come up with its own debit card and generate even more money from Venmo.

PayPal’s decision to launch a debit card wasn’t just big news for the company but also for Venmo users who were able to make purchases even more conveniently anywhere in the country.

The move was surprising to say the least considering Venmo’s main goal in 2009 to move transactions from plastic to online – only to return to plastic 9 years later. But considering the competition Venmo faces from social media companies and international banks, it make it almost necessary to bring back the debit card to acquire more customers and increase transaction volumes.