PayPal Profit Rises 59% -- Update

By Peter Rudegeair 

PayPal Holdings Inc. said Wednesday that fourth-quarter profit rose 59% despite booking a big charge related to the U.S. tax overhaul.

The San Jose, Calif.-based payments company reported a quarterly profit of $620 million, or 50 cents a share. That compares with a profit of $390 million, or 32 cents a share, in the same period of 2016. On an adjusted basis, PayPal's per-share earnings rose to 55 cents, above the estimate of analysts polled by Thomson Reuters.

PayPal incurred a tax expense of $180 million because of the "impact of the recently enacted Tax Cuts and Jobs Act of 2017," which brought its effective tax rate to 28.2%. In the fourth quarter of 2016, PayPal's effective tax rate was 16.8%.

Shares fell over 3% in aftermarket trading. PayPal's stock has been highly sought after by investors, rising 114% over the past year.

Payment volume totaled $131.45 billion, up nearly one-third from the same period a year ago. Venmo, PayPal's mobile person-to-person payments service, handled $10.4 billion in volume during the fourth quarter. That was 86% more than the volume it handled in the fourth quarter of 2016.

Net revenue rose 26% to $3.74 billion, more than analysts were expecting. Revenue from PayPal's lending activities and its other services rose 43% to $523 million.

Expenses rose 15% to $2.9 billion thanks in part to a one-third increase in transaction costs.

PayPal also announced that it has reached a deal with eBay Inc., its former parent company, that would keep its digital wallet as a payment option on the auction website through 2023. A previous operating agreement that covered PayPal's role on eBay was set to expire in 2020.

Despite being separate companies since 2015, eBay is still a large, though declining, contributor to PayPal's business. Around 22% of PayPal's 2016 revenue came from customers on eBay's platform, down from 26% in 2015 and 29% in 2014.

Write to Peter Rudegeair at [e-mail]

(END) Dow Jones Newswires

January 31, 2018 18:27 ET (23:27 GMT)

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