Here’s Why PayPal Stock Is Up Over 40% in 2024
TradingKey - When we think of payments, we tend to think of traditional banks and the credit card companies that they partner with. However, more recently, digital payments are taking off in a big way and certain fast-growing fintech firms are building a sizeable presence in specific niche areas of banking.
One prime example of this is PayPal Holdings (NASDAQ: PYPL), a pioneer in the digital payments industry. The firm has had a rollercoaster journey in the stock market over the past few years.
But 2024 marks a remarkable comeback, with its stock climbing over 40% year-to-date. The rebound comes on the back of a strategic turnaround led by its new CEO, Alex Chriss, who took the reins in late 2023. Here’s a closer look at what’s driving PayPal’s resurgence.
PayPal’s digital legacy
PayPal revolutionised digital payments when it was founded in 1998. Today, the company boasts a two-sided network of hundreds of millions of consumers and tens of millions of merchants worldwide. Its flagship products, including PayPal Checkout and Venmo, have become household names worldwide.
But in recent years, PayPal faced stagnation, losing ground to competitors like Stripe, Apple Pay, and Square. Innovation slowed, and the company’s growth trajectory faltered.
Enter Alex Chriss, a seasoned executive with a reputation for revitalising businesses. In his first year at the helm, Chriss has implemented a bold turnaround strategy aimed at transforming PayPal from a payments company into a comprehensive commerce platform.
The Alex Chriss effect
Chriss wasted no time in identifying PayPal’s pain points and charting a path forward. Here are the key elements of his turnaround plan:
- Reinvigorating innovation
One of Chriss’s first moves was to address the company’s innovation drought. Under his leadership, PayPal launched several new features, including:
- Fastlane: A one-click guest checkout feature aimed at improving conversion rates, especially for mobile users.
- PayPal Everywhere: A marketing campaign and product suite designed to integrate PayPal into both online and offline transactions, including cashback rewards on PayPal debit cards.
These initiatives are already showing results. Fastlane, for instance, has been adopted by over 1,000 merchants, with early data showing significant increases in transaction success rates.
- Strategic partnerships
Chriss has forged new partnerships with major commerce players, including Amazon, Shopify, and Adyen.
These alliances not only expand PayPal’s reach but also enhance its value proposition for merchants and consumers alike. Notably, the company’s collaboration with Shopify allows PayPal’s branded checkout to integrate seamlessly into Shopify Payments.
- Operational efficiency
To streamline operations and focus on profitability, PayPal announced a 9% workforce reduction in early 2024. This move aims to "reduce complexity and duplication," according to the company, while freeing up resources for high-impact growth areas.
- Venmo revamp
Venmo, PayPal’s popular peer-to-peer payments app, is undergoing a significant transformation. The company is adding new features like direct deposits and debit card integration to position Venmo as a central part of users’ financial lives. These efforts are paying off, with monthly active debit card accounts growing by 30% year-on-year.
Impressive Q3 2024 results
Source: PayPal’s Q3 2024 earnings presentation
PayPal’s third-quarter earnings underscore the progress made under Chriss’s leadership:
- Revenue: US$7.85 billion, up 6% year-on-year on a currency-neutral basis
- Earnings per Share (EPS): US$1.20, beating Wall Street estimates by 13 cents
- Total Payment Volume (TPV): US$423 billion, up 9% year-on-year
These strong financials prompted the company to raise its full-year guidance for transaction margin dollars and non-GAAP EPS, further boosting investor confidence.
The road ahead for PayPal investors
Despite its impressive turnaround, PayPal is still in the early stages of its transformation. Chriss has been candid about the challenges ahead, emphasising that much work remains to unlock the full potential of PayPal and Venmo.
However, the momentum in terms of the business’s progress is undeniable. With a renewed focus on innovation, strategic partnerships, and operational efficiency, PayPal is well-positioned to reclaim its status as a leader in digital payments.
For investors, PayPal’s 2024 rally is a testament to the power of strong leadership and a clear strategic vision. If Chriss’s initiatives continue to bear fruit, this could be just the beginning of a longer-term growth story.
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