PayPal has spent years trying to convince Wall Street that its best days are not behind it. Now CEO Enrique Lores has a number to beat.
Stripe and Advent International reportedly walked away from a $53B offer after PayPal rejected the approach. This has left Lores with a fairly straightforward task: prove PayPal is worth more fixed than sold.
Lores is keeping both possibilities open. He said PayPal would consider future offers against its own turnaround plan, but believes execution is currently the better route.
“We will always choose whatever provides more value.”
Enrique Lores, PayPal
Venmo is becoming the turnaround test
Venmo gives Lores something PayPal does not need to build from scratch: a large base of consumers already using one of its products regularly.
The problem is that PayPal has never made nearly as much from those users as their activity might suggest.
Lores wants to change that by pushing Venmo beyond sending and receiving payments. The app already offers crypto trading and PYUSD stablecoin storage, with buy now, pay later planned next.
That puts Venmo into more direct competition with SoFi, Chime, Cash App, and Robinhood, which have spent years adding financial products around their original services.
PayPal does have a useful starting point. Analysts cited by The Wall Street Journal say Venmo's users skew younger and more affluent, giving the company an audience it can sell additional products to without first having to find new customers.
The harder part is getting them to use those products. PayPal's reach has never been the issue. Turning that reach into stronger growth has been.
Cost cuts are funding the rebuild
Lores is reorganizing PayPal around branded checkout, processing and Venmo, and consumer financial services. He is also stripping costs from the business to give those bets more room.
The company is targeting $1.5B in annual run-rate savings over the next few years and plans to cut 20% of its workforce over two to three years, equal to more than 4,500 jobs. Another 251 positions are being eliminated at its San José headquarters.
Those cuts are arriving while earnings are already under pressure. Second-quarter net income fell 12% to $1.26B, putting more weight on the businesses Lores has chosen to keep investing in.
Branded checkout is one of them. PayPal plans to spend $400M on improving and growing the business this year as Apple Pay and Alphabet's Google Pay compete for the checkout transactions PayPal once dominated online.
Lores is also considering acquisitions, but buying another business will not answer the question hanging over PayPal. Investors first need evidence that the assets already inside the company can grow again.