After the stock shed about two-thirds of its value over the past year, PayPal Holdings Inc. released a jam-packed earnings report on Tuesday, announcing a new chief financial officer, buyback approval and a cost-cutting program, while also confirming activists at Elliott Management Corp . involved in the company.
Additionally, the company beat expectations with its second-quarter financial results while providing a mixed update to its full-year guidance.
PayPal shares PYPL,
Soared 12% in after-hours trading on Tuesday after soaring to its best day in two years last week amid reports that Elliott had taken a stake in the deal. Elliott confirmed involvement in Tuesday’s report, just as the activist investor had done with struggling Pinterest Inc. PINS on Monday afternoon.
as it reported the result
“As one of PayPal’s largest investors with approximately $2 billion invested, Elliott has a strong belief in PayPal’s value proposition,” said Jesse Cohn, Elliott’s managing partner, in a statement included in PayPal’s release. “PayPal has an unmatched and industry-leading presence in its payments businesses and has the right to win in the short and long term.”
He added that PayPal’s report “highlights a number of steps that are underway and being initiated to help realize the significant value opportunity” in the business.
The company brings Electronic Arts Inc. EA,
Chief Financial Officer Blake Jorgensen is taking on the same role at PayPal. He replaces John Rainey, who resigned earlier this year to become Walmart Inc.’s WMT.
Even before Jorgensen joins the company on Wednesday, PayPal executives announced a series of financial initiatives, including a new $15 billion share buyback program. Executives are targeting operating margin growth in 2023.
The executive team will undergo further restructuring in the coming months, as PayPal announced that Chief Product Officer Mark Britto plans to retire at the end of the year and the search for his successor is underway.
The recent moves are all “positive,” according to Mizuho analyst Dan Dolev.
A key question in PayPal’s report was whether the company would cut full-year revenue guidance again after a series of cuts earlier this year. Executives eventually trimmed their guidance and are now modeling about 10% growth on a spot basis, down from a previous outlook of 11% to 13% growth. They also model currency-neutral growth of around 11%, which is at the low end of the company’s range to date.
Executives also expect full-year adjusted earnings per share to be around $3.87 to $3.97. The company’s previous guidance called for adjusted earnings per share of $3.81 to $3.93.
For the most recent quarter, the company reported a net loss of $341 million, or 29 cents a share, while it reported net income of $1.18 billion, or $1.00 per share, in the year-ago quarter. The loss in the most recent quarter reflected the negative impact of losses on strategic investments and a tax charge related to acquired intellectual property.
On an adjusted basis, PayPal earned 93 cents per share, down from $1.15 per share last year 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 expected $6.78 billion.
The company generated $339.8 billion in total payment volume, or the value of transactions processed through its platform, compared to $311.0 billion in the year-ago quarter. Analysts expected TPV of $342.8 billion.
PayPal had 429 million active accounts in Q2, essentially flat from Q1 totals, but up from 403 million active accounts in Q2 2021. Executives said earlier this year that they were focusing less on absolute user growth as they tried to 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 forecast would equate to about $6.80 billion, while analysts tracking FactSet were looking for $6.78 billion.
PayPal executives are expecting third-quarter adjusted earnings per share to be between 94 cents and 96 cents, while analysts had expected 95 cents.
The company is involved in an “information sharing agreement” with Elliott and will “continue to collaborate on a number of value-added opportunities,” according to the press release.