Following the release of stronger-than-expected second-quarter results, financial services company PayPal saw a rise in its share price of up to 13 percent on Tuesday in extended trading. PayPal announced that it had a value creation information sharing deal with Elliott Management during its earnings presentation.
“As one of PayPal’s largest investors, with an approximately $2 billion investment, Elliott strongly believes in the value proposition at PayPal,” in the presentation, managing partner of Elliott Jesse Cohn was quoted. “PayPal has an unmatched and industry-leading footprint across its payments businesses and a right to win over the near and long term.”
The announcement comes a day after Elliott announced that it had surpassed all other investors to become Pinterest’s top shareholder.
Here is how PayPal performed throughout the second quarter:
- According to Refinitiv, earnings came in at 93 cents per share, compared to 86 cents per share as expected by analysts.
- According to Refinitiv, the company had revenue of $6.81 billion versus the forecast of $6.79 billion.
Although the company’s revenue increased by 9% year over year, it posted a $341 million net loss as opposed to a $1.18 billion profit in the same time last year. PayPal had 429 million active accounts at the end of the quarter, which was 6% more than the same period last year but less than the 432.8 million estimate provided by StreetAccount’s survey of analysts.
The business emphasised the strides it has achieved in improving capital efficiency. Costs are anticipated to be cut by $900 million this year, and the yearly savings from these cutbacks and other improvements are expected to total at least $1.3 billion by 2023, according to the company.
“We have plenty of heads. We can be more productive,” on a conference call with analysts, CEO Dan Schulman said.
Four years after launching a $10 billion programme, PayPal unveiled a new $15 billion programme for share repurchases.
According to Schulman, the company is cutting back in some sectors, including stock trading, and has announced that it will concentrate on cards in stores rather than only QR codes. According to him, the business is looking at PayPal and its Venmo payment software interoperability.
The company also claimed to have a “commitment to work with Elliott Investment Management L.P. on a comprehensive evaluation of capital return alternatives.” Elliott held a stake in PayPal, according to a July report by The Wall Street Journal.
“Our discussions are focused on operational improvements, revenue generating investments and capital allocation, and they are consistent with our short and long-term objectives and plans,” Schulman said.
Mark Britto, PayPal’s chief product officer for the previous two years, will be succeeded, the company announced. Toward the end of the year, Britto will retire.
The adjusted earnings per share range that PayPal provided in April was $3.81 to $3.93, but it now expects $3.87 to $3.97 for the entire year. Refinitiv’s survey of analysts found that $3.82 per share was expected.
In the second quarter, PayPal added around 400,000 net new active accounts, or NNAs, primarily as a result of Venmo growth. PayPal reported 2.4 million NNAs in the first quarter, for a total of around 2.8 million in the first half of 2022. The company stated that it still plans to add 10 million NNAs for the entire year.
“However, as with all of our forecasts, NNA growth could be affected by broader economic factors, given the channels that drive organic customer acquisition, may be negatively impacted by falling consumer sentiment and reduced demand for discretionary goods,” Schulman said.
Shares of PayPal have decreased more than 52% so far this year.