PayPal Holdings (NASDAQ: PYPL) CEO Alex Chriss fulfilled his promise to “shock the world” on Thursday, unveiling a slew of artificial intelligence (AI) features and a new cashback system integrated into the PayPal app. However, the market response was far from what Chriss might have anticipated, with the company’s stock plummeting nearly 5% within minutes and experiencing an overall decline of almost 9% since the recent high of $63.74 set January 22.
The recent stock turbulence follows PayPal’s attempt to redefine its role in the payments business through six key initiatives. Despite the innovative strides, Wall Street remains skeptical, prompting analysts to debate the potential impact of these moves on the company’s trajectory.
Chriss outlined the initiatives, including a revamped checkout process and a refresh of the PayPal app, on Thursday. However, shares took a hit, dropping 3.7% to $60.71 on the same day, before gaining 1.76% on Friday to close the week at $61.78.
“PayPal is on a mission to revolutionize commerce, globally, and today we are starting the next chapter,” the chief executive said.
With a substantial user base of nearly 400 million consumers and 35 million merchants, PayPal handles transactions for approximately a quarter of the world’s ecommerce annually, emphasizing the trust shoppers place in the platform for their payments.
The six new tools unveiled by PayPal encompass various aspects of the digital commerce landscape:
- New Checkout Experience: PayPal aims to streamline the checkout process significantly by eliminating friction points such as password prompts and slow response times. Users can now log in with facial recognition or fingerprints, resulting in a checkout process twice as fast. The integration of AI is expected to make the system smarter and faster over time.
- Fastlane by PayPal: Fastlane offers users the convenience of saving payment and shipping information for one-tap checkouts. This feature aims to eliminate the need to remember usernames, passwords, or share credit card information for each transaction. In a pilot with select BigCommerce customers, Fastlane recognized 70% of consumers and accelerated checkout speeds by nearly 40%.
- PayPal Smart Receipts: Customers making purchases through PayPal will receive smart receipts containing order information and tracking details. AI is utilized to predict the customer’s potential future purchases from the same business. Additionally, retailers can include personalized recommendations and cashback offers directly within the receipt.
- PayPal Advanced Offers Platform: This tool empowers business clients to target consumers based on specific products they have purchased across the internet, going beyond traditional browsing history. The platform employs AI to organize and analyze data from billions of dollars in online purchases.
- Updated PayPal App with CashPass: PayPal is set to launch CashPass, a service within its mobile app, providing consumers with access to personalized cash-back offers generated through AI. The feature, scheduled for release in March, will feature offers from major retailers, including Walmart, Best Buy, eBay, McDonald’s, Priceline, Ticketmaster, and Uber.
- Venmo Business Profiles: Venmo, owned by PayPal, will introduce enhanced business profiles to aid consumers in discovering small businesses. Users can subscribe to these profiles, and businesses can leverage the app to offer promotions directly to customers.
Mizuho analysts, led by Dan Dolev, expressed a mixed reaction to the announcement. While acknowledging the positive aspects of using AI to enhance the checkout experience and boost consumer offers, they cautioned against doubling down on Branded Checkout, predicting potential long-term regret.
J.P. Morgan analysts, led by Tien-tsin Huang, adopted a more optimistic stance, praising PayPal for focusing on areas that need improvement. They noted the rollout of all products within the year and commended the company for addressing key issues, such as simplifying the consumer checkout experience and emphasizing customer loyalty and rewards. J.P. Morgan rates PayPal at Overweight with a price target of $80.
On the other hand, BTIG analysts Andrew Harte and Thomas Smith offered a more neutral perspective, stating that the initiatives were expected, and investors might not view them as groundbreaking. While acknowledging the steps in the right direction, BTIG argued that steering the company back to consistent and profitable revenue growth would take more than a year to achieve, maintaining a Neutral rating on the stock.
The recent announcements mark the first major move under Chriss, who joined PayPal in September. The company’s new products showcase its effort to tap into investor enthusiasm for AI, a trend that has driven U.S. stock markets to record highs. Chriss, acknowledging 2024 as a “transition year” for PayPal, aims to grow revenues beyond transaction-related volume.
Information for this story was found via Reuters, Barron’s, Digital Commerce 360, and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
