Over the past 12 months, shares of PayPal Holdings (PYPL 2.90%) have plunged almost 40%, whereas the S&P 500 is up about 4%. The financial technology (fintech) pioneer has missed out on the broad market rebound because investors are understandably apprehensive: Longtime CEO Dan Schulman is set to retire and the future of PayPal lies with some unknown successor.
That is, the successor was unknown until now. On Monday, PayPal named Intuit's Alex Chriss as its new president and CEO. Here's what investors need to know.
Who is Alex Chriss?
Chriss is joining PayPal after 19 years at Intuit, a global fintech company focusing on tax preparation software, small-business software, and more. The business segment Chriss led for the past four years, the Small Business and Self-Employed Group, accounted for roughly one-third of Intuit's total revenue in its most recent quarter.
PayPal's press release points out that the small business and self-employed segment grew revenue at a 23% compound annual growth rate (CAGR) under Chriss' leadership. This is an encouraging number considering PayPal's own growth rate has fallen well below that threshold in recent years, as the chart below shows.
PYPL Revenue (Quarterly YoY Growth) data by YCharts
Some of Intuit's growth needs to be taken with a grain of salt. In November 2021, the company completed a $12 billion acquisition of Mailchimp, which contributed to growth in the business segment overseen by Chriss. Therefore, not all of the growth was organic.
Chriss deserves credit for successes at Intuit nevertheless. His segment of the business often delivered the highest growth for Intuit. And PayPal's board of directors hopes Chriss' leadership and vision can reignite growth for PayPal's stagnating business, ultimately leading to better days for PayPal's stock.
Is PayPal tipping its hand with this hire?
With around 400 million active consumer accounts as of the most quarter, PayPal is known best for its consumer-facing fintech products. However, many people don't realize that the company has a strong and growing bundle of enterprise services as well.
There's a good reason that many people are unaware of PayPal's enterprise products for online merchants. While businesses can use PayPal's branded checkout services, many opt to use its unbranded checkout services. In other words, you could have purchased something online using PayPal's technology without even knowing it.
Unbranded checkout services for PayPal are powered by Braintree, a company it acquired for $800 million a decade ago. And Braintree has been one of the better parts of PayPal's business in recent years. In fact, PayPal's transactions per active account reached a record 51.4 in the second quarter. Management says this record result was primarily achieved thanks to financial results from Braintree.
Given that Braintree adoption is going so well, it makes sense for PayPal to double down on this part of the business. And this might be the exact reason it hired Chriss away from Intuit. After all, at Intuit Chriss focused on small businesses, which is the same clientele that Braintree is targeting.
Since Chriss has only just been named PayPal's new CEO, investors still need to wait for him to share a more comprehensive long-term vision for the company. To be clear, there are still plenty of unanswered questions regarding the future of PayPal.
That said, it does appear that PayPal is looking to lean into what's already working well. And that could be the winning strategy that finally turns the slumping stock price around.
