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What CFO Departure Means for PayPal Stock

·3 min read
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There is a big change taking place in the PayPal (PYPL) C-suite. On Tuesday, the company announced the departure of CFO and EVP of Global Customer Operations, John Rainey, who leaves to take on the role of CFO at Walmart.

While the digital payments giant continues its search for a permanent replacement, current SVP of corporate finance and IR Gabrielle Rabinovitch will become interim CFO. Aaron Karczmer, who presently leads Risk, Platform Services, and Legal will become the EVP of Global Customer Operations.

With PayPal shares hit hard (down by 65% from their peak), Mizuho’s Dan Dolev says Rainey’s time as CFO has been characterized by “overpromising and under-delivering,” and is not surprised by the news. “The most glaring mishap was perhaps guiding to 750mn accounts by 2025, only to walk it back several months later,” says Dolev. “The more worrisome development is that the announcement was not complemented by a guidance update.”

Given Rainey vacates his position just 12 days into the second quarter without a “reaffirmation or change” to the 1Q guide is “somewhat peculiar,” and differs from other recent departures in the payments space – Wex and Marqueta – which included some form of update. As such, Dolev wonders if Q1 will be marked by bearish developments such as “weakness” in Venmo or the checkout business. “One thing is certain,” says the analyst, “the lack of a guidance update will create more uncertainty into 1Q than the stock needs at this juncture.”

While Dolev is anticipating a “negative stock reaction,” the analyst still considers PYPL “attractive from a valuation & strong brand presence perspective.” Accordingly, there’s no change to Dolev’s Buy rating or $175 price target. If met, the figure could yield returns of ~66% over the one-year timeframe. (To watch Dolev’s track record, click here)

Baird analyst Colin Sebastian also says the departure is not a “complete surprise,” especially considering the CFO’s new destination. Sebastian notes that although Rainey cannot be blamed for the difficulties in predicting how the business would develop over the past few years, investors have “expressed some frustration with both the pace of product innovation and in reliably meeting financial and operating targets.”

However, the 5-star analyst takes a more sanguine approach, believing the departure could be an opportunity for the company to “reassess its growth and margin targets in the face of current macro and competitive headwinds.” Additionally, considering Rabinovitch’s insider knowledge and track record, he notes the “advantages” of her becoming CFO.

To this end, Sebastian sticks with an Outperform (i.e. Buy) rating and $175 price target too. (To watch Sebastian’s track record, click here)

The Street’s average target is only slightly higher; at $177.92, the figure suggests one-year gains of 64%. Overall, the stock’s Moderate Buy consensus rating is based on 29 Buys, 10 Holds and 1 Sell. (See PayPal stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.