Shares in PayPal Positions (PYPL) surfaced Wednesday after the company said it was open to partnering with activist investor Elliott Management. The e-commerce company added $15 billion to its PYPL share buyback program when it reported mixed financial results for the June quarter.
PayPal released its quarterly results for June late Tuesday. Second quarter earnings for PayPal stocks were down year-on-year, but surpassed displays as total payment volume missed estimates.
PayPal also confirmed that hedge fund Elliott Management has taken a $2 billion stake in the company.
PYPL Stock: Elliott Management Drives Cost Savings, Increased Repurchase
During its Q2 earnings call with analysts, PayPal said the company and Elliott Management are “aligned with the mutual goal of maximizing shareholder value, with the primary focus being improved profitability and greater returns on capital.” PayPal has entered into an information sharing agreement with Elliott Management.
PayPal plans to save $900 million in cost-cutting measures by 2022 and $1.3 billion by 2023.
San Jose, California-based PayPal has announced the appointment of Blake Jorgenson as its new Chief Financial Officer. Jorgenson was executive VP of special projects at video game company Electronic art (EA).
“With more reasonable top-line guidance, a new well-regarded CFO and Elliott helping to manage cost-cutting initiatives/capital allocation, PYPL stocks are now finally on the road to recovery,” Deutsche Bank analyst Bryan Keane said in a report.
At Susquehanna, analyst James Friedman said in a report, “From a cost discipline standpoint, PayPal has committed to both Q4 2022 and margin expansion in 2023. We believe these initiatives will support long-term profitability. .”
PYPL stock rose 12.7% to nearly 101 today during early trading in the stock market. During Tuesday’s regular session, PayPal stock rose 1.2%.
PayPal earnings for the quarter ended June 30 came in at 93 cents per share, down 19% from a year earlier. The e-commerce company said sales rose 10% to $6.8 billion.
Analysts expected PayPal earnings of 87 cents a share on revenue of $6.78 billion. A year earlier, PayPal made $1.15 a share on $6.24 billion in revenue.
PayPal stock: payment volume light
In the second quarter, total payment volume processed by merchant customers increased 13% to $339.8 billion. Analysts had estimated a total payment volume of $342.83 billion.
For the current quarter ending September, PayPal forecast earnings per share of 95 cents, in line with estimates. PayPal forecast revenue of $6.8 billion, below estimates of $7.02 billion.
“Management defied the bears that expected further cuts to the outlook, and left the outlook for 2022 largely the same, adjusting revenue growth to the lower end of the range (+11%), but modest earnings per share increased,” it says. Lisa Ellis, analyst at MoffettNathanson in a report.
At UBS, analyst Rayna Kumar said in a report, “With the potential to generate more than $5 billion in free cash flow this year, PayPal stocks appear undervalued.”
As e-commerce boomed during the coronavirus pandemic, shares in PayPal rose. But PayPal shares were down about 71% from a record high of 310.16 on July 26, 2021.
PayPal stocks have a relative strength of just 13 out of the best 99 possible, according to IBD Stock Checkup.
former parent eBay (EBAY), which split from PayPal in 2015, has moved its payment processing from PayPal to Netherlands-based Adyen.
If you’re new to IBD, consider checking out CAN SLIM’s stock trading system and basics. Recognizing chart patterns for issues such as PYPL stocks is a key to investment guidelines.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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