It’s a tumultuous time for payment companies.
While there are various reasons behind the leadership transition, investors are hopeful that changes at the top will boost the company’s stock, which has fallen nearly 80% in the past two years.
Contrary to what Tolstoy said about unhappy families, unhappy stocks are often the same. The outbreak has left e-commerce and contactless payments — areas where PayPal and Block operate — and ambitions beyond their core competencies. At PayPal, there were plans for a “super-app” that offered payments, online shopping, savings and other tools. Block had “super-app” designs that included payments and a “buy now, pay later” post-paid platform. (The company owns the music streaming service Tidal, a.k.a
Spotify
Technology [SPOT] competitive.)
But when markets came back down to earth in 2022, investors were less concerned with plans for global dominance and more focused on profits and forecasts. PayPal has since scaled back its dream of reaching 750 million users and other lofty ambitions, but it still faces weak growth in its high-margin checkout business. The latest quarterly results suggest a slowdown in earnings before interest, taxes, depreciation and amortization growth.
At PayPal, Alex Chris, product-oriented executive from
Intuit
(INTU) from outgoing CEO Dan Shulman in 2015. Schulman will take over on September 27, planning to remain on the board until May 2024. Block founder and CEO Jack Dorsey will assume the role of Square CEO when Alyssa Henry leaves on October 2. .
PayPal shares rose 2.8% when Chris was announced as CEO on August 14, while Block shares fell 2.2% on September 19, after word that Dorsey had taken the role. But despite the mixed stock reaction, the consensus on the street is the same, change will take time.
Both PayPal and Block declined to comment.
On The Block, Moffett Nathanson analyst Lisa Ellis admitted Henry’s exit was a “negative indicator” for the health of the square business but remained optimistic about the block. She was encouraged to see a 17 percent increase in total merchandise volume for sellers with sales of more than $500,000, nearly double that of sellers with sales of less than $500,000.
After spending time on cryptocurrencies and music, Wall Street has reasons to be excited about Dorsey’s focus on New Square.
“Dorsey has a rare brilliance in building viral networks. According to Mizuho Securities analyst Dan Dolev, renewed focus on the selling point and the slowdown in Bitcoin could be a big long-term positive.
The new CEO is important for PayPal, but so are the growing users. In that way, the company can get a boost from Temu.
Pinduoduo
S
(PDD) Chinese goods marketplace, PayPal usage on the site was 12 times higher in August than a year ago, said Dolev. “[We] Look at the good news coming out of China that will help fuel brand checkout growth,” he explains.
Both stocks look very cheap compared to historical averages. PayPal trades at 11.6 times earnings, below the five-year average of 32 times, while Block trades at 22.6 times earnings, below the five-year average of 93 times, according to FactSet.
It could mean a cheap price, or it could be a warning, and investors could be forgiven for wanting to see signs of life in both before making a move.
Don’t wait too long – you might miss the payment.
Write Carleton English at [email protected]
