Shares PayPal Holdings (PYPL) rose Wednesday after the company said it was willing to work with activist investor Elliott Management. The e-commerce giant added $15 billion in PYPL share repurchase program while reporting mixed June-quarter financial results.
PayPal reported June quarter earnings late Tuesday. Second-quarter earnings for PayPal stock fell from a year ago, 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, big buyback
In a Q2 earnings call with analysts, PayPal and Elliott management “are aligned with the mutual goal of increasing shareholder value, with an initial focus on improved profitability and capital appreciation.” PayPal has an information sharing agreement with Elliott Management.
PayPal plans to save $900 million in cost-cutting measures by 2022.
San Jose, Calif.-based PayPal announced the appointment of Blake Jorgensen as its new chief financial officer. Jorgensen was executive VP of special projects at the video game company Electronic Arts (EA)
“With very reasonable top-line guidance, a new well-regarded CFO, and Elliott helping with cost-cutting initiatives/capital allocation, PYPL stock now finally appears on the road to recovery,” Deutsche Bank analyst Bryan Keane said in a statement.
At Susquehanna, analyst James Friedman said in a statement: “From a cost discipline perspective, PayPal has committed to fourth-quarter 2022 and 2023 margin expansion. We believe these efforts will support long-term earnings power.”
PYPL stock rose 12.7% to close at 101 in early trade Stock market today. PayPal shares rose 1.2% in the regular session on Tuesday.
PayPal’s earnings for the quarter ended June 30 were 93 cents per share, down 19% from a year earlier. The e-commerce company reported revenue growth of 10% to $6.8 billion.
Analysts expected PayPal to earn 87 cents on revenue of $6.78 billion. A year ago, PayPal earned $1.15 a share on sales of $6.24 billion.
PayPal Stock: Payment Volume Lite
In Q2, total payment volume processed from business customers rose 13% to $339.8 billion. Analysts forecast a total of $342.83 billion.
For the current quarter ending September, PayPal forecasts EPS of 95 cents. PayPal forecast revenue of $6.8 billion, compared to estimates of $7.02 billion.
PayPal’s stock soared as e-commerce boomed during the coronavirus pandemic. But PayPal stock fell 71% from an all-time high of 310.16 on July 26, 2021.
PayPal stock has a relative strength rating of only 13 out of an excellent possible 99. IBD Stock Checkout.
Former parents Ebay (Ebay), divested from PayPal in 2015 and moved its payment processing from PayPal to Netherlands-based Adyen.
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