PayPal touts turnaround plan after results beat fails to impress

By Utkarsh Shetti

May 5 (Reuters) - PayPal's ‌new CEO Enrique Lores ​outlined ​a plan to streamline its organizational structure and reduce costs after the digital payments firm's first-quarter results left investors underwhelmed.

The company's shares closed down 7.7% on ‌Tuesday despite profit and revenue coming in above Wall Street expectations.

PayPal has ⁠been navigating intense competition in the payments space after the entry of Big Tech firms and newer entrants such ‌as Klarna and Stripe.

The firm had ‌a legacy lead from a pandemic-era surge in digital payments, but growth has since cooled. Its shares are down more than 80% from record highs in mid-2021.

Lores, who took ​charge at PayPal in March, outlined plans to leverage artificial intelligence to streamline operations across the company and eliminate duplication in workforce layers, but did not provide additional details.

PayPal ⁠said these initiatives would save about $1.5 billion over the next two to three years, adding it will reinvest that amount to ​drive new growth.

"We view this print as a placeholder until the Board makes the call on a more definitive strategy in the coming weeks/months," ​Evercore ISI analysts said in a note.

Since Lores took ‌over, the company has said it will reorganize its business into three operating units, including a separate Venmo-focused division.

Its share slide has reportedly drawn ⁠takeover interest for some or all of its assets. Some analysts have said breaking up the company could drive near-term shareholder value.

RESULTS BEAT

Though consumers have been grappling with inflationary pressures and economic uncertainty exacerbated ⁠by the Middle East conflict, wealthier households have largely underpinned spending resilience.

PayPal's revenue rose 7% to $8.35 billion, beating ​analysts' average estimate of $8.05 billion, according to data compiled by LSEG. On a currency-neutral basis, total payment volumes also jumped 8% over a year ago to about $464 billion.

It reported adjusted profit of $1.34 per share for ‌the three months ended March 31, also above an estimate of $1.27 per share.

Total payment volumes at its higher-margin online branded checkout segment grew ‌2% in the first quarter.

In a filing late on Tuesday, PayPal disclosed it had received requests in ⁠March from the U.K. Financial Conduct Authority ‌for information regarding its agreements ​with Visa and Mastercard relating to funding and use of its digital wallet.

(Reporting by Utkarsh Shetti in Bengaluru; additional reporting by Arasu Kannagi Basil; Editing by ‌Pooja Desai)

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• TCL sues Samsung for false advertising over 'Mini LED' televisions
• Jehovah's Witnesses say six believers sentenced in Russia on evidence from 'bereaved' informant
• US construction spending drops to nearly three-year low in July