PYPL shares heading for recovery with Elliott Management’s support?

Parts in PayPal Holdings ( PYPL ) rose Wednesday after the company said it is open to partnering with activist investor Elliott Management. The e-commerce firm added $15 billion to its PYPL share buyback program as it reported mixed financial results for the June quarter.

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PayPal reported results for the June quarter late Tuesday. Second-quarter earnings for PayPal stock fell from a year earlier but topped views as total payment volume missed estimates.

PayPal also confirmed that hedge fund Elliott Management has taken a $2 billion stake in the company.

PYPL Stock: Elliott Management Spurs Cost Cuts, Bigger Buybacks

On the Q2 earnings call with analysts, PayPal said the company and Elliott Management “are aligned on the mutual goal of maximizing shareholder value, with an initial focus on improved profitability and increased return on capital.” PayPal has entered into an information sharing agreement with Elliott Management.

PayPal plans to save $900 million in cost cuts in 2022.

San Jose, California-based PayPal announced the appointment of Blake Jorgenson as its new chief financial officer. Jorgenson had been the managing director of special projects at the video game company Electronic art (EA).

“With more sensible top-line guidance, a new well-regarded CFO and Elliott helping with cost-cutting initiatives/capital allocation, PYPL stock now finally looks on the road to recovery,” Deutsche Bank analyst Bryan Keane said in a report.

At Susquehanna, analyst James Friedman said in a report: “From an expense discipline perspective, PayPal has committed to margin expansion in both the fourth quarter of 2022 and 2023. We believe these initiatives will support long-term earnings power.”

PYPL stock fell 12.7% to near 101 in early trading on the stock market today. In Tuesday’s regular session, PayPal shares rose 1.2%.

PayPal earnings for the quarter ended June 30 came in at 93 cents per share, down 19% from a year earlier. The e-commerce company said revenue rose 10% to $6.8 billion.

Analysts expected PayPal earnings of 87 cents per share on revenue of $6.78 billion. A year earlier, PayPal earned $1.15 a share on sales of $6.24 billion.

PayPal Stock: Light for Payment Volume

In Q2, total payment volume processed from merchant customers rose 13% to $339.8 billion. Analysts had projected total payment volume of $342.83 billion.

For the current quarter ending in September, PayPal forecast EPS of 95 cents, in line with estimates. PayPal forecast revenue of $6.8 billion, below estimates of $7.02 billion.

As e-commerce boomed during the coronavirus pandemic, PayPal shares soared. But PayPal stock had plunged about 71% from an all-time high of 310.16 on July 26, 2021.

PayPal stock has a relative strength rating of just 13 out of a possible 99, according to IBD Stock Checkup.

Former parent eBay (EBAY), which spun off PayPal in 2015, has moved payment processing from PayPal to Netherlands-based Adyen.

If you are new to IBD, consider taking a look at the stock trading system and CAN SLIM basics. Recognizing chart patterns for issues like PYPL stock is a key to investment guidelines.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on wireless 5G, artificial intelligence, cyber security and the cloud.

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