In our view, PayPal's second-quarter results were solid, but we think the market will likely key on management's lowered revenue guidance for the full year. While we will likely need to lower our 2019 growth forecast a bit, this issue doesn't particularly concern us, and we will maintain our $91 fair value estimate and narrow moat rating.
PayPal made a few changes to its guidance. First, the company raised its EPS forecast, but this improvement appears to be driven mainly by unrealized gains on its investments in Uber and MercadoLibre. These gains are likely one-time in nature and incidental to the fundamentals of the business. More importantly, the company lowered its constant currency revenue guidance for the year to 14%-15% from 16-17%. This was primarily attributed to delays in product integrations with some key partners and planned pricing changes. This development does not overly concern us. Despite any near-term operational hiccups, we think the near-term outlook for PayPal remains bright, as its focus on online and mobile payments leaves it well-positioned given current consumer trends, and we don't believe this will be a sustained issue. Longer term, our concerns center on PayPal's ability to maintain its narrow moat and dominant position within its niche, as we expect growing convergence of traditional and online acquirers. We are pleased that the company maintained its multiyear growth guidance, but any structural problems likely would extend beyond this timeline.
Excluding the impact of the consumer credit portfolio and currency effects, revenue in the quarter was up 19% year over year. PayPal continues to see strong year-over-year growth in both active accounts (17%) and transactions per account (9%), with this growth partially offset by lower take rates. While we don't believe it's a material driver at the moment, growth at Venmo remains impressive, with volumes up 70%.
PayPal's development of a network of merchant and consumers early in the evolution of online commerce has allowed the company to build and maintain an enviable competitive position within this niche. In recent years, the company's growth has remained somewhat turbo-charged by two secular tailwinds, that is, the ongoing shift toward electronic payments and the rise of e-commerce. With its focus on online and mobile payments, PayPal is well positioned to extend its run of strong growth in the near term. Management has set a target of high-teens top-line growth over the next few years, and we believe achieving this is realistic.
Longer term, though, the picture is less clear, and we see a mix of opportunities and threats that create a fairly wide range of outcomes. PayPal remains a somewhat unique player within the electronic payment ecosystem. We think this remains its key strength, but its position on both the merchant and consumer side could be challenged over the long run. With e-commerce becoming a more material portion of the market, traditional point-of-sale acquirers are building out their online capabilities. On the consumer side, services such as Apple Pay represent a new type of competition for PayPal. If competition on both sides chips away at PayPal's position, the network effect that has driven the business historically could deteriorate quickly. On the other hand, PayPal remains a preferred partner in the online space. Further, the acquisition of iZettle gives the company a viable platform for point-of-sale transactions, and its experience with mobile payments could boost its position on this side as consumers look for more convenient options at the cash register. As a result, PayPal could leverage its online niche into a growing presence in point-of-sale transactions and see meaningful new opportunities to monetize its narrow moat. In balance, we think the company can hold its own, and any losses in its online position can be made up elsewhere. However, we recognize the potential to veer in either direction.
Payment processing of any type is highly scalable, as once a payment platform is established, there is little incremental cost to additional transactions. If viewed through the lens of the acquiring industry, PayPal has material scale with almost $600 billion in annual volume but falls well short of the volumes handled by larger players such as First Data. However, the acquiring industry contains niches, and within the e-commerce space, PayPal is a clear leader, which we think places a narrow moat around PayPal's operations.
However, PayPal is not just an acquirer, its relatively unique model centers around a two-sided platform, with PayPal enjoying relationships with both merchants and consumers. We think this approach has material benefits and was instrumental in allowing PayPal to develop its current foothold in the industry. Having information on both sides of the transaction gives PayPal a meaningful edge in combating fraud, which was a very meaningful factor in the early days of the Internet, and remains a key issue. With an ability to combat fraud, PayPal was in a position to become a valued partner on both sides of a payment. Further, the relative ease of using PayPal in an online transaction materially boosts conversion rates, with PayPal transactions converting at a rate of almost 90%, compared with an industry average of about 50%. This highlights the ease of checkout for consumers and the attraction for merchants. With these dynamics in place, PayPal was able to generate a network effect, and the company had 267 million active accounts at the end of 2018, including 22 million merchant accounts.
We typically think of a network effect as very strong source of advantage, and one that often gives rise to a wide moat. In PayPal's case, though, we think the effect is more mild, as the company is a relatively small piece of the overall electronic payment infrastructure. We think PayPal will remain a preferred partner in the online world, given the relative convenience and security of its platform, but its market position is not so strong that the company can dictate terms to other players or gobble up increasing amounts of market share. In our view, the limitations of the network effect are most apparent in the company's decision a couple of years ago to switch to neutrality in terms of payment choices (that is, to allow consumers to choose their method of funding, as opposed to being defaulted to funding options that are more advantageous for PayPal).
Given the limited capital needs of the business, historical returns on invested capital have been higher than any reasonable estimate of the cost of capital. Since the spin-off from eBay in 2015, return on invested capital has averaged 22% if goodwill is excluded.
We are increasing our fair value estimate to $91 from $76 per share after reassessing and raising our long-term growth and profitability assumptions. Our fair value estimate equates to 33.8 times our base 2020 earnings per share. We think PayPal has a clear path to strong growth in the near term and that it can continue to generate solid growth over the long haul as it rides the secular shift toward electronic payments generally and e-commerce and mobile payments more specifically. Our projections result in a 16% revenue CAGR over the next five years and 13% over the next 10 years. We forecast only modest margin expansion over the next few years, as we believe the inherent scalability of the business will be largely offset by an increase in transaction expense, driven by the company's move toward offering consumers more payment choices. However, we expect the company's strong growth to propel solid margin expansion once this shift subsides. We project operating margins to hit 24% by 2028, compared with 16% in 2018, or roughly 80 basis points annually, on average, over the full projection period. This is roughly equivalent to the margin expansion the company has seen over the past three years, if transaction expense were excluded. We use a cost of equity of 9%.
The payment processing industry is evolving, and it is possible that new competition and future disruption could significantly reduce the profitability PayPal can generate or cut it out altogether. As the company's revenue is directly tied to revenue at its merchant customers, PayPal is sensitive to macroeconomic conditions. PayPal's international operations present currency and execution risk. Some governments have shown a preference for local payment processors, which could freeze PayPal out of certain markets. PayPal has made substantial acquisitions and has communicated that it will continue to do so. These acquisitions could destroy value if the company overpays or fails to effectively integrate these operations, and the company's moat could be diluted. Finally, any company involved in processing payments has potential exposure to breaches in its systems.
We are lowering our uncertainty rating to high from very high. We still believe PayPal's long-term prospects are relatively uncertain, but after reviewing our assumptions, we believe high is a more appropriate rating. We would note, however, that we see this uncertainty as balanced and believe PayPal is as equally likely to materially outperform our long-term expectations as it is to underperform.
While we hold a favorable view of PayPal's management, we think a standard stewardship rating is appropriate. The company has a limited history as an independent company, but we think management's strategic choices and its acquisitions have generally been sound. CEO Dan Schulman joined eBay in 2014 and has led PayPal since its spin-off in 2015. Previously, he served as a group president at American Express, which provides some background in the electronic payments space.
We think PayPal's management has effectively navigated the ongoing evolution of the electronic payments space, and its choices have helped to maintain the narrow moat that surrounds the business. While PayPal has arguably simply been better placed for growth given its online focus, we think management has done a good job exploiting the opportunity set in front of the company and working to minimize competitive threats. We would point to a couple of factors to justify our favorable view. First, we think the switch to consumer choice a couple of years was a savvy move and suggests management understands both the basis of the company's moat and its limitations. This move positioned PayPal as more of a partner to other players in the ecosystem and headed off competition that might have otherwise arisen. We also think PayPal has done well to build merchant relationships outside of its core PayPal offering. Its ability to offer in-app payment functionality has positioned it to serve clients such as Uber. We think this kind of relationship has been key in extending PayPal's growth.
Since its spin-off, PayPal has been fairly active in terms of M&A, laying out almost $4 billion on acquisitions. We like the company's most recent deal, iZettle, from a strategic perspective. Purchased for $2.2 billion, iZettle is a European company with a business model similar to Square. We think the addition of this company gives PayPal a solid platform to expand into point-of-sale transactions, a move we view as timely given the increasing convergence of online and point-of-sale acquiring. In our view, a meaningful point-of-sale presence could prove critical for PayPal's competitive positioning in the long run. Among PayPal's other acquisitions, the only one we would question is Xoom, which was purchased for $900 million in 2015. We see little strategic connection between PayPal's core business and international money transfers, and we believe management's rationale for the deal is strained. However, on the whole, we think PayPal has been prudent with its acquisitions. In our view, its track record is important in this respect, given that management intends to complete $1 billion-$3 billion annually in acquisitions going forward.
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