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One year into the top job at payments giant PayPal (PYPL), Alex Chriss is emerging from a period of heads-down rebuilding with two simple messages to investors.
PayPal's next decade won't solely be focused on payments, and the 26-year-old tech firm will move with more laser-like precision to bring that vision to life.
"When I got here it was obviously a great team and an incredible company with incredible opportunity ahead. But to be honest, it was just moving too slowly." Chriss, 47, told me on Yahoo Finance's Opening Bid podcast (video above; listen below).
"And the world that we play in — this fintech world — is so dynamic, so interesting with so much competition out there that if you're not moving quickly, if you're not innovating fast, then you're just going to get left behind," he said.
The first-time CEO honed his craft during a 19-year run at TurboTax parent Intuit (INTU), where he oversaw its lucrative small business segment. He played a key role in Intuit's $12 billion acquisition of MailChimp in 2021, its largest deal ever made.
Since joining PayPal, Chriss has overhauled the entire leadership team, bringing in outsiders such as former General Electric (GE) CFO Jamie Miller. Once the fresh C-suite was rounded out, he cut projects to focus the team on bigger bets and moving quickly.
In the process, he is trying to find more cost savings to reinvest in new areas and improve profits.
"This has been one of the big things for me, shifting the company and the mindset from just being a payments company to really working across commerce," Chriss said. "We have hundreds of millions of consumers and tens of millions of merchants, and we are the one company that can connect the dots between the two of them."
New PayPal CEO Alex Chriss (on TV monitors) speaks with Yahoo Finance executive editor Brian Sozzi about the company's coming transformation. ·Jennifer Wang, Yahoo Finance
The mindset shift has begun to materialize in a series of commerce partnerships.
Shoppers using Amazon’s Buy with Prime feature can now pay via PayPal. The company will become an additional online credit and debit card processor for Shopify Payments.
It also said it would enable US merchants to invest in crypto directly from their PayPal business account. The company has started running TV ads with comedian Will Ferrell that highlight more ways to use PayPal and changed its iconic logo to a black font from its longtime blue.
“Under Alex’s leadership, PayPal has made remarkable progress doubling down on its core mission and innovation roadmap,” Enrique Lores, CEO of HP Inc. (HPQ) and PayPal's new chairman, told me.
“Alex’s strong product and technology experience combined with his commitment to the customer has resulted in significant gains for the company. It is a privilege to serve as board chair at such an exciting time for PayPal.”
Investors in wait-and-see mode
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PayPal has been on a wild ride since breaking off from eBay (EBAY) in 2015.
Expanding its reach beyond store payments to crypto and payment sharing (via Venmo) was the focus of former longtime CEO Dan Schulman.
Its market cap surged from $50 billion around its 2015 Nasdaq debut to more than $362 billion in the summer of 2021.
But cracks started to emerge in its investment thesis later that year. By the summer of 2022, the firm was attacked by famed activist investor Elliott Management, who demanded cost cuts to offset pressures on the top line and boost its sagging stock price.
The weak stock price and profits came amid rising competition from newer entrants such as Robinhood (HOOD), Affirm (AFRM), and Coinbase (COIN), and improved execution at legacy payment brands American Express (AXP), Visa (V), and Mastercard (MA).
PayPal went on to outline $900 million in cost cuts to appease Elliott — mostly through layoffs, real estate consolidation, and project cutbacks. It also uncorked a $15 billion stock buyback plan.
Then, Schulman and the board got to work on picking his successor. By December 2023, Schulman left PayPal's board, with the ship firmly in Chriss's hands.
Despite second quarter sales and operating income rising 8% and 17%, respectively, PayPal's market cap is a fraction of its peak at $79.2 billion. The stock trades on a relatively low forward price-to-earnings (P/E) multiple of 16 times as investors wait for sustainable, stronger results. Shares are down 23% in the past five years.
By comparison, Visa, Mastercard, and American Express shares trade on an average forward P/E of 25 times. Coinbase's forward P/E ratio stands at 45 times.
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"Penetration rates for both eCommerce and digital wallets to grind higher over time, which we believe PayPal will be a clear beneficiary of. Until there is greater visibility around the medium-term growth profile for transaction margin dollars and net take rate trajectory, we see limited potential for multiple expansion," Jefferies analyst Trevor Williams wrote in a client note.
Williams rates PayPal's stock at a Hold.
Chriss says he is up to the challenge of reinventing PayPal with an eye on better outcomes for shareholders.
"We've got lots of competitors that focus on consumers, lots of competitors that focus on merchants, but very few, if any, that can actually bring the two together. And so we're being hyper-focused on where we're going to win," Chriss added.
Three times each week, Yahoo Finance Executive Editor Brian Sozzi fields insight-filled conversations and chats with the biggest names in business and markets on Opening Bid. You can find more episodes on our video hub or watch on your preferred streaming service.
