Shares of PayPal Holdings Inc. (NASDAQ:PYPL) soared on Friday, rising nearly 10% as of 11:15 a.m. EDT after the company reported third-quarter results that were better than Wall Street analysts had estimated.
The online payments company reported non-GAAP earnings of $0.58 per share, better than the consensus estimate of $0.54 per share in the third quarter. Across its platform, from its core PayPal business to its rapidly growing mobile app, Venmo, PayPal Holdings is growing like wildfire.
PayPal is benefiting from growth in accounts as well as growing activity levels among its existing users. Active accounts grew to 254 million, up 15% year over year. The company reported that its average active account took part in 36.5 transactions in the third quarter, up 9.5% year over year. A combination of growth in accounts and activity per account drove a 27% increase in payment transactions year over year.
PayPal also revealed positive developments in its push to monetize its Venmo users. In prepared remarks on the conference call, the company said that 24% of its users "have now participated in a monetizable action," up from 17% in the sequential quarter and 13% in May.
Venmo's growth has been nothing but extraordinary. This quarter, total payments volume on the service grew to $16.7 billion, up 78% from the prior-year period. Incredibly, growth hasn't slowed meaningfully this year. In the first and second quarters of 2018, total payments volume on Venmo increased 80% and 78%, respectively, year over year.
Investors can look forward to the busy fourth quarter, which has historically been the strongest period for PayPal thanks to seasonal shopping patterns.
Importantly, PayPal has implemented a number of pricing actions that will take effect in the fourth quarter, including an increased fee on "instant transfers" on the Venmo platform. Users can pay a fee equal to 1% of the transfer amount to have funds moved from the app to an eligible debit card within 30 minutes, faster than the standard (free) bank transfer, which takes 1 to 3 business days.
All signs suggest that PayPal, which will turn 20 years old in December, still has years of growth ahead.
Jordan Wathen has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings. The Motley Fool has the following options: short January 2019 $82 calls on PayPal Holdings. The Motley Fool has a disclosure policy.