Feb 1 (Reuters) – PayPal Holdings Inc (PYPL.O) will have to cut costs further, with payment volumes set to decline as customers batten down the hatches to prepare for a possible economic downturn, Wall Street analysts said, warning of a difficult crisis. The year to come.
The San Jose, Calif.-based digital payments company said on Tuesday it would lay off 7% of its workforce, or about 2,000 employees, a move in line with analysts’ expectations and the company’s earlier commitment to master the costs.
PayPal has been under pressure for most of the past year as soaring inflation and fears of a recession have constrained digital payments and e-commerce spending.
“Improving margins has increasingly been a priority for management over the past year, perhaps in part due to pressure from activist Elliott Investment Management, and this feels like another step in that direction,” said Morningstar analyst Brett Horn.
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Some analysts suspect the latest job cuts were pressured by Elliot, which took a stake in the company in August.
PayPal still has the potential to “significantly improve its margins over time,” Horn added, indicating that the company has additional leeway to reduce costs.
The company cut its full-year revenue growth forecast when it reported third-quarter results in November.
As demand continues to decline, investors have no reason to be optimistic about PayPal’s medium-term growth, Jefferies analysts said in a note.
Shares of the company fell 0.3% in premarket trading on Wednesday.
Reporting by Niket Nishant in Bengaluru; Editing by Shinjini Ganguli
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