PayPal CEO Alex Chris gets praise from Wall Street in first year, stocks rise in third quarter | Wilnesh News

He was in office for about a hundred days in January. PayPal CEO Alex Chriss told CNBC’s David Faber that the payments company hasn’t had much to celebrate in recent years. But Chris confidently says he’s ready to “shock the world.”

“I love being a loser,” Chris told “Squawk on the Street” on the floor of the New York Stock Exchange. He was responding to questions about a recent series of analyst downgrades.

Dan Dolev of Mizuho Securities is among the skeptics. On January 16, the day before Chris appeared on CNBC, he downgraded his rating to the equivalent of a “hold,” writing in the title of his report: “PayPal faces an ‘A’ to a ‘Z’ competitive pressure. apple Pay, the Z stands for payment app Zelle, a money transfer service jointly owned by seven of the top U.S. banks.

A few weeks later, PayPal issued weak guidance in its fourth-quarter earnings report, sending the stock down 11% and confirming Dolev’s concerns.

PayPal appears to be in serious trouble. Its market value has fallen by more than 80% since its peak in mid-2021. The company just laid off 9% of its workforce, about 2,500 jobs, and is mired in single-digit growth. Wall Street analysts are seeing increased competition and declining acceptance rates, or the percentage of revenue PayPal gets from each transaction.

Fast forward to today, and the future is decidedly brighter for the 26-year-old Silicon Valley company and its 47-year-old CEO.

On Friday, Chris marked his first anniversary at the helm. PayPal shares rose 34% in the third quarter that ended on Monday, its biggest quarterly gain since mid-2020, when the early days of the coronavirus pandemic fueled a surge in online shopping. This is the first time in eight quarters that PayPal has outperformed the Nasdaq, which has gained just 2.6% in the past three months.

Dolev improved his rating Back in May to buy. In July, the company raised its full-year profit forecast for the second time and increased its share repurchases. Chris is here earnings release The company now “operates from a position of strength.” The stock rose nearly 9%, its best day since late 2022.

“I think he’s just been a phenomenal success story so far,” Dolev said. “The news flow is just amazing in terms of how they manage expectations.”

James Friedman of Susquehanna improved his rating Purchased on PayPal in early July. He said Chris’s comments on CNBC “set the bar very high,” but said he has been delivering on bold promises to shareholders.

“You know how he shocked the world?” Friedman said. “He actually broke his numbers.”

Much of Chris’s early success was related to improved trading margins and better monetization of key acquisitions such as the use of Braintree. Yuan For credit card processing and payments app Venmo, which is increasingly popular with businesses.

Chris finally generated some excitement on Wall Street after taking over from Dan Schulman with a massive streamlining of the organization and a renewed focus on profitability.

Dana Stalder, a new investor at venture capital firm Matrix Partners and PayPal’s head of commerce from 2004 to 2008, said: “It’s time for PayPal to bring in some new blood. He made a lot of changes very quickly, and I think he has done that. There have been many changes.

Now comes the hard part—reigniting growth.

Analysts expect revenue to grow about 6% when PayPal reports third-quarter results in about a month, according to LSEG. They expect growth of 5.5% in the fourth quarter. Sales are expected to grow only slightly in 2024, with analysts expecting full-year growth to be less than 8%.

PayPal did not make Chris available for interview for this article.

During the July earnings call, Chris said of the company’s next steps, “While change takes time and we still have a lot of work to do, we are ready today with the right leadership.” layer and are moving full steam ahead.

Chriss, 19 years at tax software vendor Intuit Before joining PayPal, he spent little time reorganizing the management team. In November, he brought in Isabel Cruz from the United States. Walmart Michelle Gill from Intuit serves as chief people officer, running a new small business and financial services group; Diego Scotti from Verizon oversees consumer groups and marketing and communications work, and Jamie Miller from Ernst & Young as Chief Financial Officer.

“As far as I know, he has replaced the vast majority of the leadership team,” Stade said. “This is a huge change.”

Early in his tenure, Chris publicly pointed out some of the reasons why he believed PayPal had struggled to gain a foothold. He highlighted overly aggressive expansion strategies through trading.

“We’ve made so many acquisitions over the past few years, and we’ve spread our focus,” Chriss said in an interview with Faber in January. “That’s one of the things I noticed when I came in 100 days ago.”

Chris added that the company has narrowed its priorities to five key items, “all focused on profitable growth.”

The most important metric, he said, is trading margin, which is how the company measures profitability in its core business. One of Chris’ strategies to address declining margins is to provide merchants with more value-added services, such as connecting several data points at checkout to reduce cart abandonment rates.

He said in January that 35 million merchants use PayPal and “when we improve their conversion rates, their business improves and our profits improve.”

PayPal noted to shareholders in its latest earnings report that its branded checkout, along with Braintree and Venmo, helped the company achieve its highest growth rate in transaction margins From 2021. Overall trading margin increased by 8% to US$3.6 billion.

Susquehanna’s Friedman said a career at Intuit was the perfect training ground for learning how to engineer a stock market recovery. Talking to senior executives is like “talking to a dashboard,” he said.

“The code for designing higher stocks is profitability,” Friedman said. Chris “really boils his management style down to focusing on what’s important” and “cutting down on what’s irrelevant,” he added.

Venmo aims to transform one of the most popular money transfer options from a strictly consumer app with no transaction fees to a merchant-focused product. door panel, Starbucks and companies like Ticketmaster Accept Venmo now As a way for consumers to pay.

company launched a nationwide movement Last month, PayPal Everywhere offered 5% cash back for using PayPal debit cards in the mobile app. Spokesperson Ferrell can be seen wearing commercial Use the PayPal app to buy lemonade and gas while emulating Fleetwood Mac’s “Everywhere.”

Stader says PayPal is far behind Apple Googlewith the leading smartphone operating system and its own embedded digital wallet.

“PayPal has been in trouble because it’s not as convenient as a mobile wallet, number one,” Stade said. “Second, it doesn’t work offline.”

But Stade sees a real opportunity for PayPal, in part because Apple just Turn on secure element This will make it easier for other developers to use the phone for contactless payments, putting it on a more equal footing with Apple Pay.

Stade said the development allows PayPal to “get on the mobile wallet track for the first time and make some real progress in offline payments.”

Another point of sale job for PayPal is called fast lanea one-click payment option for online sales that goes head-to-head with Apple Pay and Shop Pay Shopping. August, financial technology platform Adien Make a fast lane Available for enterprise use It also expressed plans to expand its product range globally in the future.

Chris told investors on an earnings call that the company was working urgently to handle the holiday rush.

“We need to get this out to as many platforms as possible so that small businesses in particular can just click a button to turn it on during the holidays,” Chris said. “We’re working with a lot of large businesses who are also Hope to get this service before the holidays.”

Venture capitalist Oren Zeev saw Chris working with small businesses in another capacity. Together they serve on the board of a home design startup Huziwhose clients include many architects and contractors.

“He obviously brings a lot to the table with his experience in small businesses,” Zeff said. As a communicator, Zeff described Chris as “drama-free” and “respected by everyone.”

While he’s quickly earned the respect of investors, with PayPal’s market capitalization increasing by more than $20 billion in the year since Chris took over, there’s still more to do.

The stock remains about 75% below its all-time high. Sahrani said shareholders were “anxiously awaiting his multi-year outlook” rather than just “trying to fix something that’s broken.”

“At some point in the near future, there will be some pressure to define this more,” Sahrani said.

Chris did not declare victory.

“Our team is moving with urgency, excited about our innovation and focused on execution,” he said on the second-quarter earnings call. “We are still in the early stages of our transformation and while excited about the progress we have made in many areas “We are satisfied but we know we can do more at a faster pace.”

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