PayPal Holdings Inc. (PYPL) saw its stock price soar on Wednesday after the company announced a series of strategic moves, including a $15 billion share buyback program, a new chief financial officer, and an information-sharing agreement with activist investor Elliott Management Corp.
PayPal Beats Earnings Expectations and Launches Stock Buyback Program
The digital payments giant reported better-than-expected earnings for the second quarter of 2023, as its total payment volume grew 9% to $340 billion. The company also raised its full-year earnings guidance, signaling confidence in its growth prospects.
PayPal’s revenue for the quarter was $6.8 billion, slightly above the analyst estimates of $6.78 billion. Its adjusted earnings per share was $0.93, beating the consensus of $0.86. The company also forecasted an EPS range of $3.87 to $3.97 for the fiscal year 2023, compared to the average estimate of $3.85.
In addition to its strong earnings results, PayPal also announced that it will launch a massive $15 billion stock buyback program, which represents about 15% of its current market capitalization of $100 billion. The company said it expects to repurchase $4 billion worth of shares in 2023, and the remaining amount in the following years.
The stock buyback program reflects PayPal’s commitment to returning capital to its shareholders, as well as its confidence in its long-term growth potential. The company said it plans to host an analyst day in the first quarter of 2023 to discuss its medium-term capital deployment strategy, which could include the introduction of a dividend.
PayPal Appoints Blake Jorgensen as New CFO and Enters Pact with Elliott Management
PayPal also announced that it has appointed Blake Jorgensen as its new chief financial officer, effective October 1, 2023. Jorgensen is currently the CFO of Electronic Arts Inc. (EA), a leading video game publisher. He has over 25 years of experience in finance, strategy, and operations, and has been instrumental in driving EA’s digital transformation and growth.
Jorgensen will succeed John Rainey, who has been PayPal’s CFO since 2015. Rainey will remain with the company until the end of the year to ensure a smooth transition. Rainey has played a key role in PayPal’s spin-off from eBay Inc. (EBAY) in 2015, as well as its acquisitions of Venmo, iZettle, Honey, and other companies.
PayPal also confirmed that Elliott Management, a hedge fund founded by Paul Singer, has taken a stake of over $2 billion in the company, making it one of its largest shareholders. Elliott Management is known for its activist approach, which involves pushing for changes in the companies it invests in to unlock value.
PayPal said it has entered into an information-sharing agreement with Elliott Management, and that both parties are working together to create value for all shareholders. Jesse Cohn, managing partner at Elliott Management, said that the firm “strongly believes in the value proposition at PayPal” and that it looks forward to “a constructive dialogue” with the company.
PayPal Stock Rises on Positive News and Analyst Upgrades
PayPal’s stock jumped as much as 14% on Wednesday, reaching a high of $99.76 per share. The stock closed at $97.92, up 9.3% from the previous day. The stock has gained over 30% year-to-date, outperforming the S&P 500 index, which has risen about 18%.
The positive news from PayPal also prompted several analysts to upgrade their ratings and price targets on the stock. Bank of America raised its rating from neutral to buy and increased its price target from $95 to $115. Morgan Stanley also upgraded its rating from equal-weight to overweight and boosted its price target from $90 to $105.
The analysts cited PayPal’s strong earnings results, its stock buyback program, its new CFO appointment, and its agreement with Elliott Management as reasons for their bullish outlooks. They also noted that PayPal has a competitive advantage in the digital payments space, with a large and loyal user base, a diversified product portfolio, and a global presence.
PayPal is one of the leading players in the online payments industry, with over 400 million active accounts and over 30 million merchants on its platform. The company offers various products and services, such as PayPal Checkout, PayPal Credit, Venmo, Braintree, Xoom, iZettle, Honey, and Paydiant.
The company has also been expanding into new areas, such as cryptocurrency trading, buy now pay later financing, QR code payments, and e-commerce tools. The company aims to become a “super app” that can offer multiple functions and features to its users and merchants.