PayPal shares jump 12% after company confirms Elliott's stake and appoints EA executive as new CFO amid profit growth

After seeing its stock lose roughly two-thirds of its value over the past year, PayPal Holdings Inc. issued a full earnings report on Tuesday, announcing a new chief financial officer, buyback authorization and a cost-savings program, while confirming that activists at Elliott Management Corp. have taken a stake in the company.

The company also beat expectations with its second-quarter financial results, while providing a mixed full-year guidance update.

PayPal shares

jumped 12% in after-hours trading on Tuesday after sharply reaching their best day in two years last week amid reports that Elliott had taken a stake in the business. Elliott confirmed the involvement in Tuesday’s report, just as the activist investor did Monday afternoon with the stalled Pinterest Inc.

as it reported profits

“As one of PayPal’s largest investors, with approximately $2 billion invested, Elliott strongly believes in PayPal’s value proposition,” Elliott managing partner Jesse Cohn said in a statement included in PayPal’s release. “PayPal has an unmatched and industry-leading footprint in its payments businesses and the right to win in the short and long term.”

He added that PayPal’s report “highlights a number of steps underway and being initiated to help realize the significant value opportunity” in the business.

The company is attracting Electronic Arts Inc.

Chief Financial Officer Blake Jorgensen will serve in the same role at PayPal. He replaces John Rainey, who left earlier this year to become Walmart Inc

Financial director.

Even before Jorgensen joined the company on Wednesday, PayPal executives announced various financial initiatives, including a new stock buyback authorization and a $15 billion savings program that they expect to save $900 million this fiscal year and 1 .3 billion dollars next year. Management is targeting 2023 operating margin expansion.

The leadership team will undergo further change in the coming months as PayPal announced that Chief Product Officer Mark Brito plans to retire at the end of the year and the search for his replacement continues.

The latest moves are “positive,” according to Mizuho analyst Dan Dolev, who said “PayPal’s cost base is too high and it needs to return capital to shareholders.”

A a key question posed in PayPal’s report was whether the company would again cut full-year revenue guidance after a series of cuts earlier this year. Executives eventually cut their forecast and are now modeling roughly 10% growth on a spot basis, down from a previous outlook of 11% to 13% growth. They also model roughly 11% growth on a currency-neutral basis, which is at the lower end of the company’s previous range.

Executives also expect about $3.87 to $3.97 in adjusted earnings per share for the full year. The company’s previous forecast called for $3.81 to $3.93 in adjusted earnings per share.

For the most recent quarter, the company reported a net loss of $341 million, or 29 cents per share, while it reported net income of $1.18 billion, or $1.00 per share, in the quarter earlier. The loss last quarter reflected the negative impacts of strategic investment losses and tax charges related to acquired intellectual property.

On an adjusted basis, PayPal earned 93 cents per share, down from $1.15 per share a year earlier, but above the FactSet consensus of 87 cents per share.

PayPal’s revenue rose to $6.81 billion from $6.24 billion, while analysts had forecast $6.78 billion.

The company generated $339.8 billion in total payment volume, or the value of transactions processed through its platform, up from $311.0 billion in the year-ago quarter. Analysts had expected $342.8 billion in TPV.

PayPal had 429 million active accounts as of the second quarter, essentially unchanged from the first quarter’s total, but up from 403 million active accounts in the second quarter of 2021. Executives said earlier this year that they would become more -little focused on absolute user growth as they looked at better monetize PayPal’s higher value users.

For the third quarter, PayPal’s management team expects net revenue growth of 10%, or 12% on a currency-neutral basis. The estimate would equate to about $6.80 billion, while analysts tracked by FactSet had expected $6.78 billion.

PayPal executives also expected 94 cents to 96 cents in adjusted earnings per share for the third quarter, while analysts expected 95 cents.

The company is engaged in an “information sharing agreement” with Elliott and will “continue to collaborate on a range of value creation opportunities,” according to the release.

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