Dan Schulman, president and CEO of PayPal Holdings Inc., arrives for the morning session of the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, U.S., Wednesday, July 10, 2019. The 36th annual event brings together many of America’s wealthiest and most powerful people in media, technology and sports.
Patrick T. Fallon | Bloomberg | Getty Images
Shares of PayPal rose 13% in extended trading on Tuesday after the financial services company reported stronger-than-expected second-quarter results. During its earnings presentation, PayPal said it had entered into a value creation information sharing agreement with Elliott Management.
“As one of PayPal’s largest investors, with an investment of approximately $2 billion, Elliott strongly believes in PayPal’s value proposition,” said Elliott managing partner Jesse Cohn. cited in the presentation. “PayPal has an unrivaled, industry-leading footprint in its payments business and a right to earn in the short and long term.”
The news comes a day after Elliott said he had become the biggest investor in social media operator Pinterest.
Here’s how PayPal fared in Q2:
- Earnings: 93 cents per share, adjusted, versus 86 cents per share as expected by analysts, according to Refinitiv.
- Revenue: $6.81 billion, versus $6.79 billion as forecast by analysts, according to Refinitiv.
Revenue rose 9% year-over-year, but the company posted a net loss of $341 million, compared to a profit of $1.18 billion in the prior year period . At the end of the quarter, PayPal had 429 million active accounts, up 6% year-over-year, but below the consensus of 432.8 million among analysts polled by StreetAccount.
The company highlighted the progress it has made in capital efficiency. It expects to cut costs by $900 million this year, and it said annualized benefits from cuts and other changes are expected to save at least $1.3 billion in 2023.
“We have a lot of heads. We can be more productive,” CEO Dan Schulman told analysts on a conference call.
PayPal has announced a new $15 billion share buyback program, four years after launching a $10 billion program.
The company is stepping back in some areas, including stock trading, and it said it would focus on cards in stores rather than exclusively QR codes, Schulman said. The company is exploring interoperability between PayPal and its payment app Venmo, he said.
And the company said it was “committed to working with Elliott Investment Management LP on a comprehensive evaluation of capital return alternatives”. The Wall Street Journal reported in July that Elliott took a position in PayPal.
“Our discussions are focused on operational improvements, revenue-generating investments and capital allocation, and they are consistent with our short- and long-term goals and plans,” Schulman said.
PayPal said it was looking for a successor for Mark Britto, its chief product officer for two years. Britto will retire later this year.
For the full year, PayPal said it expects adjusted earnings per share of $3.87 to $3.97, up from the $3.81 to $3.93 range it provided. in April. Analysts polled by Refinitiv had expected $3.82 per share.
During the second quarter, driven primarily by Venmo’s growth, PayPal added approximately 400,000 new net active accounts, or NNAs. In the first quarter, PayPal reported 2.4 million NNAs, for a total of around 2.8 million in the first half of 2022. It said it still intends to add 10 million NNAs for the full year.
“However, as with all of our forecasts, NNA growth could be impacted by broader economic factors, given the channels that drive organic customer acquisition, could be negatively impacted by lower consumer sentiment and reduced demand for discretionary goods,” Schulman said.
Shares of PayPal have fallen more than 52% since the start of the year.
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