What happened
Shares of PayPal (PYPL 1.41%) rose 14.4% in January, according to data provided by S&P Global Market Intelligence.
While the rise was encouraging, shares of the digital payments company were still down nearly 33% from a year ago.
Image source: Getty Images.
So what
The somber mood from last year has lifted somewhat as the Federal Reserve has pledged to slow down its interest rate hikes. With inflation moderating, investors have become more optimistic that the rate hike cycle is coming to an end soon, and have pushed up the prices of a wide swath of growth stocks.
PayPal is also looking forward to an increase in spending as China finally sheds its years-long strict zero-COVID policies. Early last month, the country dropped its quarantine requirements and reopened its borders to air travel. This move is seen as a shedding of the last vestiges of a restrictive policy that has seen frequent and sudden lockdowns, thereby disrupting economic activity. With Chinese consumers free to frequent malls and travel overseas, PayPal should witness a corresponding increase in payment activity that will boost total payment volume.
Perhaps in anticipation of this surge in cross-border activity, PayPal's international money transfer service, Xoom, launched a new cross-border money transfer product during the month. Named Debit Card Deposit, this service enables Xoom customers in the U.S. to send money directly to users in 25 different countries. PayPal is collaborating with Visa to include easy and secure access to funds, and its launch seems timed to coincide with an expected surge in cross-border payments as more countries resume normality and people fly more frequently for vacations and business trips.
Now what
PayPal has announced that it will shed 2,000 employees or around 7% of its total workforce. CEO Dan Schulman sent a memo to staff explaining the decision and admitted that the macroeconomic environment has led to slower business for the payments company. Aside from these job cuts, PayPal is also moving to close offices to cut expenses and become leaner as it confronts an uncertain 2023.
It may take some time for the company to get back on its feet, but PayPal still possesses a long growth runway as its total addressable market remains at $110 trillion.
