Shares of PayPal Holdings ( PYPL ) rose Wednesday after the company said it is open to working 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.
X
PayPal reported earnings for the June quarter on Tuesday afternoon. Second-quarter earnings for PayPal stock fell from a year earlier but beat views as total payment volume missed estimates.
Additionally, PayPal confirmed that hedge fund Elliott Management has taken a $2 billion stake in the company.
PYPL Shares: Elliott Management Pushes Cost-Cutting, Bigger Buyback
In its second-quarter earnings call with analysts, PayPal said the company and Elliott Management “are aligned on the mutual goal of maximizing shareholder value, with an initial focus on improving profitability and increasing return of capital”. PayPal has entered into an information sharing agreement with Elliott Management.
PayPal plans to save $900 million in cost-cutting moves by 2022.
San Jose, California-based PayPal announced the appointment of Blake Jorgenson as its new chief financial officer. Jorgenson had been executive vice president of special projects at video game company Electronic Arts (EA).
“With more reasonable top-line guidance, a well-regarded new CFO and Elliott helping to manage cost reduction/capital allocation initiatives, PYPL shares now finally appear on the road to recovery,” said the 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 fourth quarter 2022 and 2023 margin expansion. We believe these initiatives will support to long-term earning power.”
PYPL shares rose 12.7% to nearly 101 in early trade today. In the regular session on Tuesday, PayPal shares rose 1.2%.
PayPal’s earnings for the quarter ended June 30 were 93 cents per share, down 19% from a year earlier. The e-commerce company said revenue rose 10% to $6.8 billion.
Analysts had expected PayPal earnings of 87 cents per share on revenue of $6.78 billion. A year earlier, PayPal earned $1.15 per share on sales of $6.24 billion.
PayPal Stock: Payment Volume Light
In the second quarter, the total volume of payments processed by merchant customers increased 13% to $339.8 billion. Analysts had expected a 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.
As e-commerce boomed during the coronavirus pandemic, PayPal’s stock soared. But PayPal shares had fallen about 71% from an all-time high of 310.16 on July 26, 2021.
PayPal stock has a relative strength rating of just 13 out of a possible 99, according to IBD Stock Checkup.
Former parent eBay ( EBAY ), which was spun off from PayPal in 2015, has shifted payment processing from PayPal to Netherlands-based Adyen.
If you are new to IBD, consider checking out their Stock Trading System and CAN SLIM Basics. Recognizing chart patterns for topics like PYPL stock is key to investment guidelines.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
YOU MIGHT LIKE IT TOO
Bear market news and how to handle a market correction
Best Growth Stocks to Buy and Watch: Check IBD’s stock list updates
How to use the 10-week moving average to buy and sell