PayPal Predictions

From http://onlyebay.blogspot.com/2008/07/q2-predictions-for-paypal.html

PayPal had a great Q1, adding three more airlines, launching mobile-payments with Sprint Nextel, gaining access to two major PSP's with 18,000 combined merchants, introducing PayPal Pay Later across all EBAY listings, pursuing innovative promotions, and celebrating its 10th year anniversary. So what growth can we expect in Q2?

PayPal Merchant Services continues to make huge strides in signing up new merchants and capturing a larger share of merchant payments. At the same time, as PayPal Merchant Services becomes more ubiquitous across merchants, the more e-commerce growth as a whole (estimated at 17% in 2008) weighs on the division. After three consecutive quarters of greater than 60% Y/Y growth in TPV, I expect the Merchant Services to slow to 55% Y/Y growth in Q2. On-EBAY TPV is the wild card in Q2. If my 14% Y/Y growth in Marketplaces GMV for Q2 is correct, the effect on PayPal's on-EBAY TPV is staggering. Because of increasing PayPal penetration across EBAY Marketplaces around the world, my estimate would result in a 22% Y/Y increase in PayPal's on-EBAY TPV. To put this perspective, it would be the highest on-EBAY TPV growth in 6 quarters. Putting both of these together and doing the math, I expect overall PayPal TPV to grow by 36% Y/Y in Q2. And just like in Q1, I expect revenue growth will lag TPV growth by roughly 1% due to continued erosion in PayPal's take-rate (as a result of payment funding mix). I therefore predict record PayPal revenue of $613 million for Q2 2008, a growth rate of 35 Y/Y. If correct, this would represent another all-time record quarter for PayPal and a substantial acceleration in growth from Q1.