EBay said it will start processing payments globally using Dutch payments company Adyen
PayPal slumps as former parent Ebay chooses new partner
PayPal's shares fell as much as 12 per cent in after-hours trading on Wednesday after former parent company eBay said it had signed up a new primary payment processor.
EBay said it will start processing payments globally using Dutch payments company Adyen, allowing its users to remain on the eBay website when checking out.
PayPal said eBay shoppers will still be able to select PayPal as a form of payment until at least July 2023. The news from eBay came as PayPal reported quarterly earnings that beat Wall Street estimates but gave a disappointing outlook for the first quarter. PayPal shares initially fell 5 per cent after the release of the quarterly results.
The chief executive officer of PayPal, Dan Schulman, said the changing relationship with eBay was very “manageable” and that it was in line with PayPal’s new strategy.
EBay accounts for about 13 per cent of total payments processed by PayPal.
PayPal was spun out of eBay in 2015 and has since been working to transform itself from a company that mainly processed payments for its parent company to one that processes payments for other large companies and their customers, as well as for individuals paying family and friends.
PayPal’s new strategic direction has led to partnerships with numerous large financial institutions and big technology companies including Alphabet's Google, Apple, Mastercard, Visa and JP Morgan.
San Jose, California-based PayPal forecast first-quarter adjusted earnings of 52 cents to 54 cents per share. Analysts on average were expecting 54 cents, according to Reuters.
PayPal expects revenue for the full year of $15 billion to $15.25bn. Analysts had been forecasting $15.16bn, according to Reuters.
PayPal’s focus on partnerships and acquisitions have been paying off with growth in payment volumes and users.
The company processed $131bn in payments in the fourth quarter, up 32 per cent from a year earlier, and added 8.7 million active customers.
PayPal has been looking to freshen its brand and deepen usage with younger customers through its peer-to-peer payments app Venmo. Venmo processed around $35bn in payments in 2017, up 97 per cent.
PayPal’s net income rose to $620 million, or 50 cents per share, in the quarter ended December 31, from $390m, or 32 cents per share, a year earlier.
Excluding one-time items, the company earned 55 cents per share, beating the average analyst estimate of 52 cents, according to Reuters.
Net revenue climbed to $3.74bn from $2.98bn.
The results included a net tax expense of $180m connected to the recent US tax reform, the company said.