PayPal (PYPYL US)



WEEKLY INVESTMENT IDEAS - 20220802 PYPL FCN
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PayPal’s shares have surged over 20% in the past two weeks, in part due to reports of activist investor Elliott Management taking a material stake in the company.


PayPal is in the process of restructuring and simplifying its operating model. It expects to incur an additional US$100m in restructuring charges this year including via layoffs. However, the job cuts will ultimately help the firm save about US$260m a year in employee-related costs. According to a Bloomberg article citing people familiar with the matter, Elliott plans to push for PayPal to speed up those cost-reduction efforts.


PayPal is still a leader in digital payments. According to payments industry research firm Mercator Advisory Group, PayPal is the top used payment service for online shopping, having been used by 24% of consumers.


Interest in the "Super App Shift" has not dwindled. In fact, it’s the opposite. A recent survey by PYMNTS and PayPal found that 72% of the global consumers surveyed are interested in using such an app to save, shop, and spend, with 25% saying they are very or extremely interested and another 47% saying they are slightly or somewhat interested. https://www.pymnts.com/mobile-applications/2022/72-pct-global-consumersare-interested-in-a-super-app/


Valuations are attractive – Growth at a reasonable price. Paypal is trading at FY22 earnings of 22.6x vs 19% EPS CAGR from 2022-2025. Paypal reports 2Q earnings tomorrow, 2 Aug 2022.