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PayPal issues disappointing revenue forecast for the coming year and announces a Venmo partnership with Amazon.

• In the third quarter, PayPal recorded a 13 percent growth in revenue year over year.
• The company issued a fourth-quarter prediction that fell far short of analysts' expectations, and provided disappointing guidance for next year.
• PayPal is shifting away from eBay and has recently announced a new partnership with Amazon.

On Monday, PayPal reported a 13 percent increase in third-quarter revenue and announced a partnership with Amazon to allow U.S. consumers to pay using Venmo at checkout beginning in 2022.

However, after initially increasing in extended trading, PayPal shares plummeted 5% after the business provided a revenue forecast for the coming year that fell short of analysts' estimates.

Here’s how the company did versus expectations:

Earnings per share: $1.11, adjusted, compared to $1.07 expected by analysts in a Refinitiv poll.

Revenue: $6.18 billion vs. $6.23 billion expected.

PayPal stated in a statement that total payment volume increased 26% to $310 billion in the quarter ended Sept. 30, and the business gained 13.3 million net new active accounts, bringing the total to 416.

Payment volume for PayPal's Venmo app, which began supporting bitcoin services in April, increased by 36% to $60 billion. Customers in the United States can use digital currencies to buy, sell, and check out. PayPal's crypto ambitions have positioned the corporation as a competitor to Coinbase, the country's most popular crypto exchange, thanks to its network of 33 million retailers.

PayPal users will be able to utilise their Venmo accounts to make purchases on Amazon.com and the Amazon mobile shopping app starting next year.

The agreement comes as PayPal prepares for a future without eBay. eBay is in the process of transferring sellers away from PayPal and onto its own payment system, six years after the businesses parted up. PayPal reported that volume on eBay markets fell 45 percent in the quarter, accounting for less than 4% of total income.

On the earnings call following the report, PayPal CEO Dan Schulman noted, "This is obviously a very big milestone in our Venmo monetization efforts." "Now that we're no longer bound by the contractual duties of the eBay operating agreement, it's the start of an exciting journey with Amazon," says the company.

PayPal expects adjusted earnings of $1.12 per share on net revenue of $6.85 billion to $6.95 billion in the fourth quarter. Refinitiv polled analysts, who predicted $1.27 adjusted profits per share on $7.24 billion in revenue. The company's revenue projection for the year has been lowered by 18 percent, to a range of $25.3 billion to $25.4 billion. Analysts had predicted a revenue of $25.78 billion.

While the price rose immediately after the report as investors focused more on the Amazon agreement than on fourth-quarter guidance, the stock fell sharply when PayPal began talking about the next year, fiscal 2022.

On the call, the corporation stated that revenue for the year will climb by around 18%, resulting in full-year revenues of close to $30 billion. According to FactSet, analysts expected revenue of $31.6 billion. PayPal emphasised supply chain difficulties as well as broader economic and spending habits challenges.

"Without stimulus payments, consumer confidence is undermined," Schulman remarked on the call. "And, if the economy improves, more individuals may opt to conduct their holiday shopping in stores."

After the call, Dan Dolev, an analyst at Mizuho Securities, stated that people were enthusiastic about the Venmo-Amazon deal until they heard the fiscal year forecast.

"The poor '22 guidance rained on the parade," said Dolev, who advises PayPal shareholders to buy the shares.

PayPal was a major pandemic benefit, with its shares more than doubling last year as e-commerce soared throughout the outbreak. This year, the storey has shifted, as the stock is down 2% in 2021, ignoring the after-hours move, while the Nasdaq is up 24% in the same time frame.

After news arose last month that PayPal was in late-stage talks to acquire social networking startup Pinterest, investors became particularly pessimistic on the stock. PayPal later stated that it was not interested in acquiring Pinterest "at this time."

On Monday's call, Schulman addressed the issue, telling analysts that he wanted to address "recent rumours that made their way through the headlines." He didn't say anything about Pinterest.

"It is our job to investigate all potential opportunities to increase shareholder value," Schulman stated. "However, only a few deals will clearly fit our stringent financial, strategic, and capital allocation criteria."