Shares in PayPal Holdings (PYPL) popped on Wednesday after the company said its open to working with activist investor Elliott Management. The e-commerce firm added $15 billion to its repurchase program of PYPL stock when it reported mixed June-quarter financial results.
PayPal reported June quarter earnings late Tuesday. Second quarter earnings for PayPal stock fell from a year earlier but topped views as total payment volume missed estimates.
Also, PayPal confirmed that hedge fund Elliott Management has taken a $2 billion stake in the company.
PYPL Stock: Elliott Management Spurs Cost Cutting, Bigger Buyback
On the Q2 earnings call with analysts, PayPal said the company and Elliott Management “are aligned with the mutual goal of maximizing shareholder value, with the initial focus being improved profitability and increased return of capital.” PayPal has entered into an information sharing agreement with Elliott Management.
PayPal plans to save $900 million in cost-cutting moves in 2022 and $1.3 billion in 2023.
San Jose, Calif.-based PayPal announced the appointment of Blake Jorgenson as its new chief financial officer. Jorgenson had been executive VP of special projects at video game company Electronic Arts (EA).
“With more reasonable top-line guidance, a new well-regarded CFO, and Elliott helping mange cost cutting initiatives/capital allocation, PYPL stock now finally appears on the road to recovery,” said Deutsche Bank analyst Bryan Keane in a report.
At Susquehanna, analyst James Friedman said in a report: “From an expense discipline perspective, PayPal committed to both fourth-quarter 2022 and 2023 margin expansion. We believe these initiatives will support long-term earnings power.”
PYPL stock popped 12.7% to near 101 in early trading on the stock market today. In 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 revenue 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 earned $1.15 a share on sales of $6.24 billion.
PayPal Stock: Payment Volume Light
In Q2, total payment volume processed from merchant customers climbed 13% to $339.8 billion. Analysts had projected total payment volume of $342.83 billion.
For the current quarter ending in September, PayPal forecast EPS of 95 cents, in line with estimates. PayPal forecast revenue of $6.8 billion, below estimates of $7.02 billion.
“Defying the bears who were anticipating further guidance cuts, management left its 2022 guidance largely the same, adjusting revenue growth to the low end of the range (+11%), but modestly increasing EPS,” said Lisa Ellis, analyst at MoffettNathanson in a report.
As e-commerce boomed during the coronavirus pandemic, shares in PayPal soared. But PayPal stock had plunged about 71% from an all-time high of 310.16 on July 26, 2021.
PayPal stock holds a Relative Strength Rating of only 13 out of a best-possible 99, according to IBD Stock Checkup.
Former parent eBay (EBAY), which spun off PayPal in 2015, has shifted its payment processing from PayPal to Netherlands-based Adyen.
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Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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