PayPal shareholder Third Point predicts shares could hit USD 125; backs CEO but wants improved margins, cost cuts
24 JUL 2018
PayPal Holdings [NASDAQ:PYPL] shareholder Third Point has predicted that the San Jose, California-based online payments processing company’s share price could reach USD 125 (EUR 106) within a year and a half, the Financial Times reported. The newspaper cited a 2Q18 letter from the hedge fund to its investors for the information.
Third Point said it sees comparisons between PayPal and other leading internet platforms such as Amazon and Netflix: a high market share that is increasing, unexploited pricing power, and significant potential to increase margins.
PayPal’s share price closed USD 1.77 up at USD 89.24 at the close of trading in New York on Monday, 23 July, giving the company a market capitalisation of USD 105.96bn
The report quoted Third Point’s Chief Executive Daniel Loeb, who described his counterpart at PayPal, Dan Schulman, as “excellent.” However, Loeb added that Third Point expects PayPal’s management to minimise costs, improve operating margins and cut costs of information technology, credit servicing, collections and customer service, the item noted.
Third Point gave no indication of the size of its stake in PayPal, the report added.
The hedge fund noted that operating margins at PayPal are below those at competitors including Visa and Mastercard.
The item noted that PayPal has been trying to diversify its business by making headway in mobile payments, partnerships with rival payment processors and expanding its Venmo money transfer business.
Third Point said Venmo, cost reductions and offline payments are expected to increase revenues at PayPal.
Background:
An Activistmonitor report on 20 July cited two people familiar with the matter who said Third Point was “poking around” PayPal. However, one of the people said PayPal’s performance has been so strong that it was not clear what improvements Third Point might suggest, if any.
An Activistmonitor report on 20 July cited two people familiar with the matter who said Third Point was “poking around” PayPal. However, one of the people said PayPal’s performance has been so strong that it was not clear what improvements Third Point might suggest, if any.