over 1 year ago • 2 mins
Paypal's results update didn't quite hit the target late last week, but its blossoming tech friendship might bode well for the future.
What does this mean?
You don’t have to be a genius to guess that companies like PayPal would suffer when spending’s on the decline, and this time, common sense is on the money: the company processed a disappointing 14% more payments by value last quarter versus the same time the year before. In fairness, PayPal's focus on marketing towards existing customers was worth the work, with active accounts making 13% more transactions, helping revenue and profit beat analysts' expectations. But that’s where the good news ends: the firm warned it wasn’t hopeful about US ecommerce this festive season, and slashed its full-year outlook. So although PayPal vowed to cut costs through layoffs and office closures, unimpressed investors still sent shares plunging 11% in the wake of the news.
Why should I care?
Zooming in: The Apple of its eye.
PayPal did have one trick up its sleeve to keep investors engaged: it announced a deal with Apple that’ll see each firm integrate the other’s offerings into its own payment systems. That’s a big deal: it means that debit cards issued by PayPal and its offshoot Venmo will now be accepted in Apple Wallet. That’ll let shoppers tap away anywhere Apple Pay is accepted – potentially a lucrative deal for PayPal, given that Apple’s service accounts for an estimated 5% of all card payments worldwide.
The bigger picture: Misery loves company.
PayPal’s not the only one anticipating a blue Christmas this festive season: Mastercard also forecast weaker-than-expected growth for this quarter, as did PayPal’s old bedfellow eBay. Even Amazon, a retail industry bellwether, isn’t too optimistic, as hard-hit consumers cut back on spending. In fact, the National Retail Federation thinks sales in November and December will only rise between 6 and 8% from last year – a decline in real terms when you factor in inflation.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.