Wanted: A CEO to lead one of the world’s best-known digital payment platforms. Crucial Attributes: Must like a challenge. Previous experience in reversing a $293 billion stock price drop is a plus.
The company in question is PayPal from the United States. He has been looking 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 tricky time. Like Netflix and Peloton, the company has been a winner in the coronavirus pandemic which has suffered a huge and painful reversal of fortune. At its peak in 2021, it had a market capitalization of $362 billion and was larger than Goldman Sachs and Morgan Stanley combined. Today it is worth less than a fifth of that.
Whoever succeeds Schulman will have the unenviable task of breathing new life into a company that once dominated the online payments landscape.
PayPal’s growth has slowed sharply. Total active accounts decreased by 2 million to 433 million in the first quarter compared to the previous quarter. The company dropped a target of reaching 750 million users by 2025 earlier this year.
Both payment volumes and revenue increased compared to last year. But the gains were driven by its Braintree unit, which provides unbranded payment technology to merchants. The division’s payments volume grew 30%, compared to 6.5% for its branded legacy checkout business and 9% for Venmo.
The bad news is that unbranded commerce is much less lucrative than branded commerce. The latter faces fierce competition from Apple, Google, Affirm and Afterpay. The operating margin fell quarter on quarter to 14.2%.
The lower costs and higher rates that have helped PayPal increase its bottom line cannot be repeated indefinitely. The shares are trading at just 13 times forward earnings, compared to 31 times for the owner of Square Block and its own three-year average of around 36 times. This tells future CEOs how tough the gig is likely to be.