PayPal's shares rally on revenue beat, margin forecast

Thu Oct 20, 2016 6:50pm EDT
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By Narottam Medhora

(Reuters) - PayPal Holdings Inc (PYPL.O: Quote) reported a better-than-expected 18.1 percent rise in quarterly revenue and its margin forecast allayed concerns over costs associated with its payment network deals with MasterCard Inc (MA.N: Quote) and Visa Inc (V.N: Quote).

PayPal's shares were up 4.2 percent at $41.78 in after-hours trading.

The payments processor said in presentation slides that it expects adjusted operating margin to be stable or higher in the next three years.

"With one slide in its deck, PayPal largely addressed investors' concerns about the impact of the Visa and MasterCard deals on its margins," said BTIG analyst Mark Palmer.

PayPal signed deals with Mastercard Inc (MA.N: Quote) and Visa Inc (V.N: Quote) earlier this year for store payments, leading to some concerns that they would result in higher transaction expenses for the company.

Susquehanna Financial analyst James Friedman said PayPal's margin forecast is "going to be seen as pretty good."

On Thursday, PayPal also raised its revenue growth forecast for a three-year period to 16-17 percent, from its previous guidance of 15 percent.

The San Jose, California-based company's active customer accounts rose 11 percent to 192 million in the third quarter, beating the average analyst estimate of 191.6 million, according to research firm FactSet StreetAccount.   Continued...

The PayPal logo is seen during an event at Terra Gallery in San Francisco, California May 21, 2015.  REUTERS/Robert Galbraith/File Photo