PayPal Market Rally: PayPal Holdings (PYPL.O) is set to gain $4 billion in market value as it commits to becoming “leaner,” a move that has pleased investors. This comes even as the payments giant discloses a subpoena from the U.S. Securities and Exchange Commission (SEC) related to its stablecoin.
In response to this news, the company’s shares surged by 7% to $55.16 before the opening bell on Thursday. Additionally, a strong full-year profit forecast has eased concerns in the market about a potential spending slowdown.
PayPal’s new CEO, Alex Chriss, emphasized the need for a leaner cost base, stating, “Simply put, our cost base remains too high.” He further outlined the company’s commitment to align its resources with its “most profitable growth priorities.”
This positive outlook underscores the resilience of consumers’ financial health, allowing them to sustain their spending habits, despite ongoing economic uncertainties.
Analysts, like J.P. Morgan‘s Tien-tsin Huang, appreciated Chriss’s approach, stating, “Chriss struck the right note and articulated well the challenges facing the company and described a sound framework for improving growth and profitability.”
William Blair, a brokerage firm, also expressed encouragement regarding the management’s focus on profitable growth.
In the midst of this optimism, the SEC’s subpoena serves as a reminder of regulatory scrutiny in the cryptocurrency industry. PayPal assured that it is cooperating with the SEC’s Enforcement Division’s request for document production.
Stablecoins are a type of cryptocurrency token designed to maintain a stable value by being pegged to an underlying asset, providing a level of security against price volatility.
PayPal made a significant move into the world of digital currencies when it launched its dollar-backed stablecoin in August, becoming one of the first major financial technology firms to do so for payments and transfers.
Also read: PayPal Stablecoin Realm with PayPal USD A Safer Approach Than Facebook’s Libra?