PayPal Holdings Inc. Chief Executive Officer Dan Schulman is getting investors to embrace his strategy of converting the online payments platform into a digital wallet, even if it requires deal-making that diminishes profit margins.
The company reported first-quarter results Wednesday that appear to show Schulman’s strategy is working and raised its annual forecast. Sales and profit topped analysts’ projections as PayPal added 6 million active customer accounts and increased the number of transactions per account by 12 percent.
Schulman wants PayPal customers to use their smartphones to pay for goods in physical stores, not just websites. He has been cutting deals with credit card issuers, banks and even Alphabet Inc. to increase the places where PayPal is accepted, hoping it entices more people to create accounts and existing customers to use PayPal more frequently.
“We continue to deliver on our vision to democratize financial services for our consumers and drive the global transition from cash to digital payments,” Schulman said in a statement. “We are deepening our merchant offerings and relationships, and expanding our network of strategic partnerships to make PayPal more available in new contexts and new markets.”
Profit in the current quarter will be 41 cents to 43 cents on revenue of $3.05 billion to $3.1 billion, San Jose, California-based PayPal said in the statement. Analysts projected 42 cents on sales of $3.07 billion.
The company also raised its annual forecast for adjusted earnings per share to $1.74 to $1.79, on revenue of $12.52 billion to $12.72 billion. The previous projections were for as much as $1.74 a share, on revenue of as much as $12.65 billion.
PayPal also announced a $5 billion stock buyback program authorized to begin when the company completes its existing repurchase program.
The shares rose as much as 7.4 percent in extended trading after closing at $44.41 in New York. The stock has gained 13 percent this year.
PayPal split from online marketplace EBay Inc. in 2015 to help it evolve from a payment button on websites into a broader service that lets people find and pay merchants and send money to friends through smartphone apps. Schulman has prioritized growth over profitability hoping to fend off competing digital wallets from such companies as Apple Inc.
The company last year inked agreements with payment networks Visa Inc. and Mastercard Inc. to increase PayPal’s presence in physical stores, where it hopes to lure shoppers with time-saving features such as apps that let them order ahead and skip lines. PayPal wants to attract shoppers and merchants with its one-touch feature, which lets shoppers quickly pay with mobile devices using saved account information.
Earlier this month, PayPal announced a deal with Alphabet’s Google that enables PayPal payments from Google’s digital wallet Android Pay through the tap of a phone at thousands of new retail locations.
PayPal reported first-quarter adjusted earnings of 44 cents per share on revenue of $2.98 billion. Analysts on average estimated profit of 41 cents on revenue of $2.94 billion. Total payment volume increased 23 percent in the quarter to $99.3 billion.
Active customer accounts were 203 million in the first quarter, up from 197 million in the fourth quarter. Transactions per active account increased 12 percent to 32 in the trailing 12 months.
