PayPal Holdings Inc.’s story over the past few quarters has been about the company’s transaction margins, which have been under pressure lately due to changes in the company’s business mix.
But the narrative coming out of the company’s third-quarter report was decidedly less wonky — at least for a short while. Yes, PayPal
PYPL,
+5.33%
still faces margin challenges, but analysts seemed more focused on the big-picture message delivered by Chief Executive Alex Chriss, who assumed that role at the end of September.
Chriss wasn’t necessarily on many analysts’ short lists when they were hypothesizing about CEO candidates before his appointment, but he seemed to strike the right tone on Wednesday’s earnings call.
Read: Who is Alex Chriss? 5 things to know about the next CEO of PayPal.
Baird’s Colin Sebastian titled his note to clients: “There’s a New Sheriff in Town.”
“PayPal’s Q3 results were a bit better than expected (mix still an issue), but the highlight was an early taste of new CEO Alex Chriss and what he has in store: faster product development, narrower focus on profitable growth, and operating cost reductions,” Sebastian wrote.
He added that Chriss “appears ready to rock the boat, having already identified operating leverage opportunities, along with strong belief in key strategic goals include reinvesting in the customer experience at checkout, improving and scaling [PayPal Complete Payments for small- and medium-sized businesses], and driving margin expansion in [Braintree] and other products.”
Sebastian gave the stock an outperform rating with a $84 target price, writing that “despite plentiful risks, we think sentiment is near bottoming out.”
PayPal shares were up 7% in Thursday’s premarket action.
RBC Capital Markets analyst Daniel Perlin chimed in that Chriss “has clearly listened to the various stakeholders.”
“The new CEO delivered a message of ‘execution and profitable growth’ as key priorities, with a focus on creating a platform company (vs. product silos) that revolve around consolidating and monetizing data assets around checkout, fostering growth in [small- and medium-sized businesses], and expanding margins via value-added services in Braintree,” he wrote. “In addition, the company’s bloated cost structure will need to be pared down to allow for a more focused growth algorithm to emerge.”
All attention turns to the fourth quarter, according to Perlin, when Chriss will reveal new metrics to investors, even though financial expectations for that period “are for roughly more of the same.”
Perlin gave outperform rating to PayPal shares, though he cut his price target to $70 from $86 in a late Wednesday note to clients.
Chriss “pressed all the right buttons, signaling a new strategic clarity and focus on profitable growth,” added Barclays analyst Ramsey El-Assal in a note titled: “Great First Impression From New CEO.”
He flagged that PayPal “is in the process of evaluating the company’s most profitable growth priorities and aligning resources to those priorities, ultimately becoming much leaner.”
El-Assal set the stock at overweight with an $81 target.
Wells Fargo’s Andrew Bauch, meanwhile, reiterated his more measured view of the stock.
“Overall, we believe refreshed messaging will lift the multiple enough to offset potential negative estimate revisions near term,” he wrote. “That said, upside potential to shares is a question that we believe will take multiple quarters to solve, particularly after another set of mediocre results.”
Bauch recently launched coverage of PayPal shares with an equal-weight rating and $55 target price.
See more: PayPal and Block shares are ‘battlegrounds.’ Here’s why that’s unlikely to change.
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