PayPal: Stable Q3, New CEO Has Started Fixing Things

Company Update (PYPL US) (Buy)

Highlights

• Alex Chriss presented his first results; shares risen 8.6% since

• Volume grew 13%; underlying Transaction Margin Dollars grew 2%+

• New CEO comments address many of PayPal’s key problems

• P/E is about 20x on FCF and does not reflect turnaround potential

• With shares at $56.10, we see a total return of 115% (26.5% p.a.)

Introduction

PayPal released Q3 2023 results after markets closed on Wednesday (November 1). Shares have risen 8.6% in the subsequent two days but are still down 24.8% year-to-date and down more than 80% from their peak in 2021:

PayPal Share Price (Last 1 Year)

Source: Google Finance (03-Nov-23).

We have been repeatedly and dramatically wrong on PayPal, with shares having fallen 60% since we upgraded our rating to Buy in 2020. Even with the post-results rebound, shares have fallen 8% since our last update in August. (For a recap of PayPal’s recent history and our involvement, see our first PayPal article on Substack published in May.)

Nonetheless we believe positive changes …