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PayPal Embarks on AI Revolution: New CEO Targets Share Price Revival

Last Updated January 26, 2024 1:48 PM
Teuta Franjkovic
Last Updated January 26, 2024 1:48 PM

Key Takeaways

  • PayPal’s stock price fell after the company revealed AI enhancements – not as impressive as investors had hoped.
  • The online payment platform is developing new AI-powered tools to enhance the e-commerce experience for users.
  • PayPal’s CEO is steering PayPal through a period of revival after a challenging few years.

PayPal Holdings Inc. experienced a significant drop  in its stock value, falling up to 6.5% – the most since August – after introducing several product enhancements that didn’t meet investor expectations.

This decline comes despite previously building optimism following CEO Alex Chriss’s statement  last week, promising to “shock the world,” which had initially boosted shares by about 5%.

PayPal Shares Dip As Product Enhancements Disappoint Investors

The announced upgrades , while aimed at improving user experience, included options for earning cash back through the PayPal app and streamlining the online checkout process.

According to a statement  from the California-based company, these enhancements also feature a one-click transaction option for customers who save their payment information.

However, these updates led to a slump in share value on Thursday, indicating that investors were expecting more  from the fintech giant’s latest offerings.

Paypal stock price crash
Credit: Bloomberg

Analysts at Keefe, Bruyette & Woods noted :

“The announcements, while encouraging for a longer-term turnaround, could be underwhelming for investors that were looking for more specific catalysts coming out of today’s event. We see these as a gradual process of improvement that is likely to take time before they start to yield any positive results.”

New Enhancements Include Venmo Business Features

PayPal’s stock  experienced a notable decrease, dropping 3.1% as of 1:31 p.m. in New York, following an earlier decline of as much as 6.5% – the largest since August 3. This downturn contributes to a 23% drop in the company’s share value  over the past year.

Among the enhancements announced on Thursday, PayPal revealed new features for businesses using its Venmo platform , including the introduction of “subscribe” buttons.

Additionally, merchants will have the opportunity to promote themselves and offer more tailored recommendations to customers, as part of PayPal’s efforts to enhance user and merchant experiences. Despite these developments, the company’s share price reflects investor concerns and a challenging market environment.

PayPal’s CEO said :

“We’re about to embark on the next trend. We’re now going to be focusing on AI personalization of commerce.”

AI-Driven Platform for Enhanced Merchant and Customer Engagement

PayPal is set to unveil the new AI-powered platform  this year, designed to help merchants connect with new customers by leveraging shopping history insights from the approximately half a trillion dollars in global merchant transactions processed by the company.

Additionally, merchants will have access to an AI tool called “smart receipts,” enabling them to offer personalized product recommendations and cashback rewards directly in email receipts to shoppers. This tool aims to create a more tailored and rewarding shopping experience.

Oppenheimer & Co. analyst Dominick Gabriele acknowledged  the recent enhancements by PayPal as “very good long-term news,” despite some investor disappointment over the absence of medium- and long-term financial targets alongside the announcement.

Enhancements Seen as Positive Long-Term Move

PayPal’s CEO attributed  the recent struggles to PayPal’s acquisition strategies and expressed his commitment to “right-size” the company. With e-commerce sales projected to account for 33% of U.S. retail revenue in the next three years, according to Bloomberg Intelligence, PayPal’s focus is on offering advanced solutions for merchants to streamline the checkout process and reduce lost sales.

Emphasizing the importance of technology in enabling global sales, Chriss pointed out  the challenge for merchants to target the right customers without overspending. He noted, “We’re now focused on the problem of the next decade,” indicating a strategic shift towards addressing emerging market needs and consumer behaviors in the digital economy.

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