Wanted: a chief executive to run one of the world’s best-known digital payment platforms. Crucial attributes: must relish a challenge. Previous experience in reversing a $293bn share price slump a plus.
The company in question is PayPal of the US. It has been on the hunt for a new boss since February, when incumbent Dan Schulman announced he would step down at the end of this year.
The vacancy at the top comes at a delicate time. Like Netflix and Peloton, the company was a coronavirus pandemic winner that has suffered a huge and painful reversal in fortunes. At its peak in 2021, it boasted a market capitalisation of $362bn and was bigger than Goldman Sachs and Morgan Stanley combined. These days it is worth less than a fifth of that.
Whoever succeeds Schulman will have the unenviable task of injecting fresh momentum into a business that once dominated the online payment landscape.
PayPal’s growth has slowed sharply. Total active accounts fell by 2mn to 433mn during the first quarter compared to the previous quarter. The company abandoned a target of reaching 750mn users by 2025 earlier this year.
Payment volumes and revenue were both higher compared to last year. But the gains were driven by its Braintree unit, which provides unbranded payments technology to merchants. Payment volume from the division was up 30 per cent compared to 6.5 per cent at its branded legacy checkout business and 9 per cent at Venmo.
The bad news is the unbranded business is far less lucrative than the branded business. The latter faces stiff competition from the likes of Apple, Google, Affirm and Afterpay. Operating margin fell quarter on quarter to 14.2 per cent.
The cost cutting and higher rates that helped PayPal increase net income cannot be repeated indefinitely. The shares are trading on just 13 times forward earnings, compared to 31 times for Square owner Block and its own three-year average of about 36 times. That tells would-be CEOs how tough the gig is likely to be.