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00:00 Julie
Let’s start with this new CEO, Enrique Lores, who was the chairman of the company, taking over as CEO. Um, what, do you think this is a good choice and what does he need to do here at PayPal?
00:18 Paul
Yeah, thanks for having me on, Julie. Uh so first off, the company under Alex Chris had undertaken a a sort of a transformation plan here after Dan Sman had been CEO and part of that was around uh moving away from some of the dilutive enterprise uh volumes that were were weighing on take rate. As we saw, uh this quarter, take rate was down at 1.65%, which weighed on the uh uh earnings outcome as we saw uh with the the EPS uh result missing uh consensus and the guided range. And so as we look at what could come from uh a new management team or uh you know, a new leadership, um we’re looking to see how much of this is going to be a a continued pivot away from those enterprise volumes that uh were even called out on this quarter’s earnings call as being some of the driver here, uh in addition to other factors like international growth moderating particularly in Germany, uh as well as uh macro concerns around retail, particularly for middle-income cohorts, uh as well as some sector specific uh call outs like travel, ticketing, crypto, uh gaming, etc. And so as we think about what um uh a new CEO, uh you know, an administration under uh Laura’s as leading PayPal uh could look like, it it really has to be in our view a multi-faceted approach given the call outs on this call as being the the key drivers of the underperformance.
01:21 Julie
And and how much is under PayPal’s control versus not?
01:29 Paul
Well, some of it is called out on on the the earnings call this morning is about execution around innovation, uh streamlining the uh checkout process, removing friction points through biometrics and other key checkout enablement uh tools to just drive more conversion, increase basket size, increase throughput of BNPL. Though BNPL has been a bright spot, it’s been uh uh a bright spot alongside Venmo for example. Uh but some of it as you noted is the the macro backdrop, uh particularly in in international as well. And also, uh just looking at the competitive landscape. Management called out the competitive landscape as being a pressure point, uh and so to what extent might innovation help combat that those competitive dynamics versus the marketplace just uh growing over time with more competitors, you know, crowding into that TAM of uh e-commerce as the sort of the primary uh TPV driver for them.
02:40 Julie
Paul, um I know you’ve got an outperform rating on the stock here. Um, I guess if you liked it when it was 25% higher, you probably it’s it’s looks even more attractive now. I don’t know. I mean, after these results, is it how how do you hold on to hope for all those those things that you say that it needs to work on?
03:02 Paul
What we’ll say is that uh as you think about PayPal’s scale, it does continue to be the largest Fintech in our view globally. The TPV volume, the total payment volume for the quarter was $475 billion. They did almost 1.8 uh trillion in volume uh US dollar volume for the year. This is a highly scaled platform. They do need to make tweaks in our views as we noted in our our recently published report on the back of this result. and so we’ll be tracking that uh to try to understand how they’re progressing towards uh taking advantage of the scale that they’ve built, this global platform, this uh ecosystem as well as the multi-faceted product lineup, right? Venmo has been very successful, uh but Venmo was also called out as as being one of the drivers of just a some pressure around the earnings profile on those volumes as was debit use. So driving monetization from these volumes will be what we will be looking for. However, the volume is uh highly scaled. So we do see that as a as a positive.