PayPal Holdings' new Chief Executive Alex Chriss took on his role just four weeks ago. He will finally get a chance to lay out his turnaround strategy for the payments company and PayPal stock when the financial tech powerhouse reports third-quarter earnings on Wednesday.
It's a rough road ahead for the former Intuit executive who was the surprise choice to lead the San Jose, Calif.-based company. Chriss is now at the helm of a company grappling with lackluster profit growth and disappointing results from its popular Venmo app.
PayPal also faces stiffer competition with Apple. PYPL stock is down 28% in 2023, shedding 16% since Chriss was named CEO on Aug. 14. PayPal stock has plunged 86% from its all-time high of 310.16 on July 26, 2021.
PayPal Stock: Focus On Multiple Fronts
Wall Street analysts don't expect Chriss to unveil major new plans yet. But they will listen closely to what he says about new investments and products.
"We do not expect Mr. Chriss to announce significant changes to PYPL's strategy and product road map, though he may identify areas for increased investment," said Bank of America analyst Jason Kupferberg in a report.
PayPal's Q3 adjusted profit is expected to grow 14% to $1.23 per share. Revenue will climb nearly 8% to $7.38 billion, analysts estimate. Total payment volume from merchant transactions is expected to come in at $379.26 billion.
Analysts do not expect PayPal to provide preliminary 2024 guidance on its Q3 earnings conference call.
"Many investors will be primarily focused on the new CEO's comments to gauge his preferences for investment vs. improving profitability
and updated strategic focuses, especially for the Braintree and branded checkout businesses," said Morgan Stanley analyst James Faucette in a report.
One area where Chriss is widely expected to focus is the small-and-medium size business, or SMB, market. PayPal blazed the trail for e-commerce payments that made it easier for SMBs to operate. That made Chriss an ideal fit for the company. Chris served as executive vice president of Intuit's Small Business and Self-Employed Group, which accounted for "more than half of Intuit's revenue." Chriss also led Intuit's $12 billion acquisition of marketing automation platform Mailchimp.
Championing SMBs
"Throughout my career, I have championed small and medium (size) businesses and entrepreneurs, who are the backbone of every economy in the world," he said in a news release when he was named PayPal CEO.
Kupferberg wrote that he expects Chriss "to bring a renewed sense of urgency to product deployment, and the Street will be focused on how he can leverage his SMB expertise."
Chriss will need to focus on several other fronts as well. PayPal, which began as an online checkout service, is pushing hard to expand its reach in financial services. His predecessor Dan Schulman famously pushed for the creation of a super app that would offer users more ways to manage their money, including a savings account and early access to their pay.
But analysts say PayPal has failed to build an effective loyalty program.
PayPal Stock: Big Moves
Then, there's been investor angst over Apple Pay, which is finally gaining traction among iPhone users. While Apple Pay has a strong advantage with in-store payments, PayPal still holds a wide lead online.
PayPal recently announced that its credit and debit cards, including Venmo cards, will be available to add to the Apple Wallet and can be used to make tap payments using an iPhone/Apple Watch or online with Apple Pay.
"We believe the news should be a modest relief to investors, as concern around share loss to Apple Pay has been a key debate around PYPL amid Apple Pay's faster growth, heavier usage among younger consumers, and unique tech advantage," said Morgan Stanley analyst James Faucette in a report.
Recently, PayPal made a big move in a huge, but controversial, arena: crypto. On Aug. 7, a week before the company announced Chriss' new role, PayPal launched its own cryptocurrency pegged to the U.S. dollar.
Expansion is not entirely a bad idea, Deutsche Bank, analyst Bryan Keane suggested.
"In our view, the new CEO should highly consider lowering adjusted margin expansion and EPS expectations for 2024 in order to make the necessary investments to fix the business," he said in a report.
PYPL Stock: 2024 Estimates
Persistent transaction margin pressure on PayPal stock has been a concern. That's expected to bottom in the September quarter, analysts say.
For fiscal 2024, PYPL stock analysts currently estimate EPS growth of 14% to $5.63 on revenue growth of 8.8% to $30.69 billion.
Analysts estimate total payment volume growth of 10%, about the same as in 2023.
For PayPal and Chriss, the good news is that institutional investors may believe the e-commerce company is fixable, says a Mizuho Securities survey.
"The majority of institutional investors (78%) prefer to see management prioritize revenue growth over margin expansion; 64% wish for a combination of the PayPal and Venmo platforms," said Mizuho analyst Dan Dolev in a report.
Follow Reinhardt Krause on X, formerly called Twitter, @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
