PayPal shares jump on promise to slim down, crypto probe worries fade

PayPal Holdings Inc. (PYPL) shares surged nearly 7% on Thursday after the company's new CEO, Alex Chriss, pledged to turn the company "leaner" and align its resources to its "most profitable growth priorities."

The pledge came as PayPal also disclosed a subpoena from the U.S. Securities and Exchange Commission (SEC) tied to its stablecoin.

Chriss, who took over as CEO in October, said in a statement that the company's cost base remains too high and that it needs to focus on its most profitable opportunities.

"We are taking a number of steps to streamline our operations and become more efficient," Chriss said. "This includes reducing costs, simplifying our processes, and focusing on our most profitable growth priorities."

PayPal's upbeat profit forecast for the full year also helped to calm market jitters about a spending slowdown. The company said it expects to earn $4.60 to $4.75 per share in adjusted earnings, which is above analysts' expectations.

Analysts were bullish on PayPal's new direction and praised Chriss for his focus on profitability.

"Chriss struck the right note and articulated well the challenges facing the company and described a sound framework for improving growth and profitability," said J.P.Morgan analyst Tien-tsin Huang.

Brokerage William Blair also said it was "encouraged by management's narrowed focus on profitable growth."

The SEC's subpoena to PayPal is a sign that the regulator is continuing to keep close tabs on the cryptocurrency industry. The SEC has been investigating a number of cryptocurrency companies in recent months, and it recently lost a high-profile court case against digital asset manager Grayscale Investments.

PayPal said it is cooperating with the SEC's subpoena.

What is a stablecoin?

A stablecoin is a cryptocurrency whose value is pegged to a stable asset, such as the US dollar. This makes stablecoins less volatile than other cryptocurrencies, such as Bitcoin.

PayPal launched its own dollar-backed stablecoin in August, making it the first major financial technology firm to embrace digital currencies for payments and transfers.

What does this mean for PayPal?

PayPal's new CEO is clearly focused on turning the company around and making it more profitable. This could mean cutting costs, streamlining operations, and exiting certain businesses.

The SEC's subpoena is a minor setback for PayPal, but it is important to note that the company is cooperating with the investigation.

Overall, PayPal's stock surge on Thursday is a sign that investors are confident in Chriss's ability to lead the company to a brighter future.