Dan Schulman, Chairman and CEO of PayPal Holdings Inc., arrives for the morning session of the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, USA, on Wednesday, July 10, 2019. The annual event Number 36 brings together many of America’s richest and most powerful people in media, technology and sports.
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PayPal Shares rose as much as 13% in extended trading on Tuesday after the financial services firm posted better-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 is a strong believer in PayPal’s value proposition,” Elliott managing partner Jesse Cohn was quoted as saying. the presentation. “PayPal has an unmatched, industry-leading presence in its payments business and is entitled to win in the short and long term.”
Here’s how PayPal did in the second quarter:
- Profits: 93 cents per share, adjusted vs. 86 cents a share as analysts expected, according to Refinitiv.
- Income: $6.81 billion vs. $6.79 billion as analysts expected, according to Refinitiv.
Revenue grew 9% year over year, but the company reported a net loss of $341 million, compared to a profit of $1.18 billion during the same period a year earlier. At the end of the quarter, PayPal had 429 million active accounts, a 6% year-over-year increase, but below the consensus of 432.8 million among analysts surveyed by StreetAccount.
The company highlighted the progress it has made in capital efficiency. He expects to cut costs by $900 million this year and said the annualized benefits of the cuts and other changes should save at least $1.3 billion in 2023.
“We have a lot of heads. We can be more productive,” Chief Executive Dan Schulman told analysts on a conference call.
PayPal announced a new $15 billion share buyback program, four years after launching a $10 billion program.
The company is backing off in some areas, including stock trading, and said it will focus on in-store cards rather than exclusively QR codes, Schulman said. The company is exploring interoperability between PayPal and its Venmo payment app, he said.
And the company said it has a “commitment to work with Elliott Investment Management LP on a comprehensive evaluation of capital return alternatives.” The Wall Street Journal reported in July that Elliott had taken a position in PayPal.
“Our discussions focus on operational improvements, revenue-generating investments and capital allocation, and are consistent with our short- and long-term goals and plans,” Schulman said.
PayPal said it is looking for a successor for Mark Britto, its chief product officer for the past two years. Britto will retire at the end of this year.
For the full year, PayPal said it expects $3.87 to $3.97 in adjusted earnings per share, up from the $3.81 to $3.93 range it provided. April. Analysts polled by Refinitiv had expected $3.82 per share.
During the second quarter, mainly thanks to the growth of Venmo, PayPal added around 400,000 new net active accounts or NNAs. In the first quarter, PayPal reported 2.4 million children, for a total of around 2.8 million in the first half of 2022. It said it still intends to add 10 million children for the full year.
“However, as with all of our forecasts, NNA growth could be affected by broader economic factors, as the channels that drive organic customer acquisition may be negatively affected by falling consumer confidence and reduced demand for discretionary goods,” Schulman said.
PayPal shares are down more than 52% so far this year.