PayPal Holdings Inc.'s new chief executive, Enrique Lores, is carving the firm's reporting into three business units and assigning financial targets to each, a move meant to give investors a clearer view of how the divisions perform. He will create separate targets and overhaul the payments company's earnings disclosures, potentially fueling investor speculation about a split. Management aims for earnings per share to grow at a double-digit percentage rate, "supported by positive transaction margin growth over time," Lores said, describing the amount the firm keeps from processing payments after costs.
He said the company is replacing "monolithic" reporting with a segmented format that will "provide more visibility into each of the businesses." Those businesses consist of PayPal's checkout products, its consumer financial services arm along with Venmo, and its payment services and crypto operations.
Lores became CEO in March, a month after Alex Chriss was ousted in February. He has already reorganized PayPal's business units and promised to cut 20% of jobs. His work at HP Inc., where he helped divide that company, has fueled questions about whether he might pursue a breakup at PayPal.
When Lores recently spoke publicly for the first time after becoming CEO in March, he had stayed mostly silent while potential buyers circled the company. At the same time, Lores and the board are considering a $50 billion-plus bid from buyout firm Advent and payments company Stripe to buy the whole business.
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PayPal, Lores said, has no problem continuing as a standalone company if the board concludes that is the best option. Lores said PayPal could pursue a deal if it was clear the move would create more value than the existing strategy. "My role as a CEO is to maximize shareholder value," he said, calling that "my key objective at every point in time."
Lores has been in charge for a little more than five months, and he has spent that time reviewing PayPal's assets and deciding where to go next. His planning includes concrete financial targets, but it does not rule out selling some assets or the entire sprawling fintech company. PayPal has hired advisers to examine strategic alternatives, according to a previous Bloomberg report, and several analysts believe a sale would produce the best outcome.
In a client note, William Blair analyst Andrew Jeffrey wrote that "the greatest potential upside would be generated by sale of the company or a split."
Investors will be watching to see whether the new segment-level reporting helps them place a value on PayPal's parts, especially Venmo. If the company remains independent, Lores's revenue targets will provide a clear benchmark for judging his progress. If the board instead chooses a sale or breakup, the financial disclosures could also make it easier for buyers or the market to assess what each piece is worth.
Some of the skepticism around PayPal, which is based in San Jose, California, stems from questions about whether Lores's background in fintech and payments is deep enough.
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