No. of Recommendations: 6
From Reuters:
PayPal (PYPL) delivered a turbulent finish to FY25, with its stock plunging over 15% following a double-miss on Q4 earnings and revenue estimates. The sell-off is being exacerbated by a cautious 2026 outlook and the surprise announcement that Enrique Lores, former President and CEO of HP, Inc. (HPQ), will succeed Alex Chriss as President and CEO effective March 1. While the company is attempting to pivot toward Agentic commerce and profitable growth in its Venmo and Enterprise segments, management's admission that execution has "not been what it needs to be" and the subsequent withdrawal of long-term financial targets have created significant unease among investors.
PYPL reported non-GAAP EPS of $1.23, missing estimates and facing pressure from a higher tax rate and sluggish branded checkout growth, which decelerated to just 1% in Q4 from 5% in Q3.Transaction margin dollars grew 3% to $4.0 bln, but faced compression as the company continues to encounter fierce competition for checkout presentment from Apple Pay and Shop Pay.Total Payment Volume (TPV) reached $475.1 bln (+9%), while active accounts grew 1.1% to 439 mln as management shifts focus toward "power users" transacting over 100 times annually.The company guided Q1 EPS to a mid-single-digit decline and FY26 EPS to a range of a low-single-digit decline to slightly positive growth, reflecting heavy reinvestment needs.The appointment of Enrique Lores, a seasoned executive from HPQ, is intended to bring disciplined execution, yet the transition is currently viewed as a negative signal of internal instability.PYPL is doubling down on its ecosystem through a new banking charter application and a strategic integration with OpenAI to embed digital wallets into ChatGPT.
Briefing.com Analyst Insight:
PYPL's 4Q25 results signal a painful reality check, with the stock's plunge reflecting unease over the cessation of long-term financial targets. The appointment of Enrique Lores -- a veteran of large-scale transformations at HPQ -- suggests the Board is prioritizing disciplined execution over the optimistic timelines of the previous leadership. However, investors likely view this transition as a negative in the short term, as it signals that the prior turnaround strategy failed to move fast enough against rivals like Apple Pay. Management is now betting on Agentic commerce through OpenAI integrations and a new banking charter to decouple valuation from legacy headwinds. While Venmo's 20% revenue growth remains a bright spot, the soft 2026 guidance indicates that the transition to business maturity will be costlier than anticipated. Until these investments meaningfully reverse the stagnation in branded checkout, the stock will likely struggle to regain momentum. Lores inherits a strong IP bedrock, but his immediate task is proving that PYPL can reclaim its dominant position in an increasingly crowded checkout landscape.
No. of Recommendations: 5
I have a small investment in PYPL and I'm thinking about cutting my losses on a rebound.
Previously, I relied heavily on PayPal for online payments, but recently I've switched
almost entirely to Apple Pay. I am seeing the same trend among my family and acquaintances.
It is simply faster, more convenient, and more secure. I doubt Fastlane will make a difference,
and I’m highly skeptical that a CEO with a hardware background can change this trajectory.
Some interesting comments by David Marcus:
https://x.com/davidmarcus/status/20188097627088734...
No. of Recommendations: 23
The last earnings report was like a bomb going off. The CEO Alex Chriss - who had an excellent reputation from his work at Intuit - was ousted on the day of the earnings announcement, and Enrique Lores is replacing him. Enrique Lores has no history with payments and he was the CEO of HP late 2019 to 2026, a period in which HP had somewhat lackluster performance.
What disappointed me, to the extreme, were was the sheer aggregate 3 things together at once:
1. New CEO announced, contracting former great confidence in him, and their strategy, they were continually expressing.
2. 2027 positive guidance completely dropped, and 2026 guidance revised down.
3. The earnings call itself being abysmal - they evaded questions, and couldn't explain their strategy clearly in my view - it was convoluted and, either I had missed some sleep or something, or I couldn't understand half what they were saying saying.
One has to question whether they have a moat at all, with PayPal having problems merely holding onto EPS despite a 6% back-back yield in place.
It is looking like 2026 is going to be a long one for PayPal.
I think there is a strong chance that they'll have either a private buy-out with a strategic reorientation, or activist investors taking a large position and also changing the strategy.
Alex Chriss being thrown out also contradicting former messaging and expression of enormous confidence in their strategy. It is understandable to change guidance a different CEO, however it was the extent of it.
At the very least, they were honest with communicating their strategy but utterly failed in execution. But I'd go as far as saying that were misleading investors during 2025 in their communications.
They are now projecting EPS to be about flat over 2026. The fact that they are also committing to buybacks at a $6 billion (at a market cap of $38 billion, that is 16% yield) means that, without the buybacks, they expect EPS to decline.
Note that their change of position under Alex Chriss was to be very focussed moving away from low/negative margin revenue with the goal for EPS rising with less regard to just rising revenue.
And now they aren't even saying they expect EPS to be maintained, and have taken back the previous 2027 forecast.
I really believed PayPal was a good investment four months ago and spent some time on it. One of the things I have learned is the advantage of companies that are founder-led, and do not expect too much from new incoming CEOs.
Still, at a PE of under 10, and buying back stock with $6 billion a year and a market cap of $38 billion. That is 38/6 = 6 years to buy back their entire float.
So the question now is whether their EPS is durable.
PayPal World was great idea - global (cloud-based) platform designed to interconnect major international digital wallets and payment systems—including Venmo, Mercado Pago, UPI, and Tenpay Global. It lets users to make cross-border payments, shop internationally and transfer money to each other from their familiar local apps. This was very clever - to have different payment systems operate together thus collectively increase their value. However the rollout seems slow, with only Vemno and PayPal being connected in the US as I understand.
Also, most of their strategy does make sense - concentrating on setting themselves up to be heavily utilized as shopping directly from LLMs starts to become common, and building Touch ID and Face ID into their branded checkouts to stay on par with Apple Pay (and retain the advantage of holding the wallet, akin to a mini-bank account, of many customers).
But .. they seem to be really slow at executing. Perhaps the culture as a whole needs a huge shakeup, rather than just shaking up the upper management and expecting things to change. They almost need an operations manager at Google to explain to them what they need to do.
Once again, researching PayPal 4 months ago, the direction of travel genuinely looked good: (1) Practical the entire the upper management team been replaced by Alex Chriss, and he had just come out of doing excellent work at Intuit, (2) their financials were moving in the same direction as they were stating - EPS in a strong uptrend with rising margins, despite slowing revenue, and (3) the strategy was good, and a lot of initiatives were being announced (PayPal World, many Agentic AI partnerships including with Google and Open AI), (4) discrete parts of the business growing quite well particularly Venmo (growing ~20% per year and ~12% of Paypal's revenue), and (5) the PE now really low.
And we went from that, to now - admitting that they can't execute, EPS falling (if it were not for the buybacks) and most importantly to me their failure to answer the most important questions at the earnings call. They were some very good questions and the way they evaded them, with a sense of actually answering them, was hilarious. It made me hugely lose confidence in the upper management.
The existence of a moat is rather more uncertain than just several months ago with the lack of growing customers. If you are maintaining customers and not growing, the only way you can continue to grow revenue is by increasing fees or new services - but they already have higher fees than their competitors. So the other way is to increase services - but their innovation rate seems far too slow. The final way out is to reduce costs and rise EPS with stable revenue - but from the last earnings call that way out fell apart as they essentially admitted that they can't even hold onto existing margins (saying EPS is stable a year away is not a pass, as they are buying back stock at around 15% pa). Snd not even discussing this and making it as clear as I have above - for me is inexcusable.
PayPal transactions have higher fees than the competition. To retain engagement I imagine that they need to produce a "WeChat-like" super-app - asap - but that should have been done well in the past - and they have not shown to have a history of innovating at a competitive pace.
The frustrating thing for PayPal is that they have an obscene number of customers - over 400 million active accounts - but a lot of the accounts are just sitting there being wasted. Revenue isn't falling yet, even if EPS look like it might be starting to fall a little. So you can see both the potential that PayPal have, along with their lack of agility to make use of that potential.
If holding a position at all, I wouldn't want to have a large position because of the non-zero possibility of EPS continuing, without buybacks, to continue to fall as they lower prices to try to protect revenue. There are really good arguments to hold a small position, though, because of 6 billion annual backpacks from 38 billion market cap and possibility that EPS will be able to be sustained or even rise over 6 years - that would result in a huge return. So the central estimate - comparing downside to upside - I think is a fairly good return from today - but as the lower estimate in the range is so poor (the business collapsing) I just wouldn't have a large position reserved for "Steadfast" firms, such as over 5%.
- Manlobbi
