In January, about one hundred days as his job PayPal CEO Alex Chris told CNBC’s David Faber that the payments company hasn’t had much to celebrate in recent years. But Chris confidently says he is ready to “shock the world”.

“I love being an underdog,” Chris said in an interview on “Squawk on the Street” from the floor of the New York Stock Exchange. He was responding to a question about the recent string of analyst downgrades.

Dan Dulio of Mizuho Securities was among the skeptics. He cut his rating to a hold on Jan. 16, the day before Chris’ appearance on CNBC, with his report headlined, “PayPal Faces Competitive Pressure from ‘A’ to ‘Z’.” A was for apple Payments, and Z represented the payments app Zelle, a money transfer service jointly owned by seven top US banks.

A few weeks later, PayPal issued weak guidance in its fourth-quarter earnings report, sending the stock down 11% and justifying Dolev’s concerns.

PayPal appeared to be in deep trouble. Its market cap was down more than 80 percent since peaking in mid-2021. The company had cut about 2,500 jobs, just 9% of its workforce, and was mired in single-digit growth. Wall Street analysts saw increased competition and a decline in take rates, or the percentage of revenue PayPal keeps from each transaction.

Fast forward to today, and the picture is dramatically brighter for the 26-year-old Silicon Valley company and its 47-year-old CEO.

Chris celebrated his one-year birthday on Friday. In the third quarter, which ended Monday, PayPal shares surged 34 percent, their biggest quarterly rally since mid-2020, when the early days of the Covid-19 pandemic dampened online shopping. fueled the increase. It was the first time in eight quarters that PayPal outperformed the Nasdaq, which gained just 2.6 percent over the past three months.

Dolly Its ratings were boosted Back on a purchase in May. In July, the company lifted its full-year profit forecast for a second time and increased share repurchases. Chris said Release of income that the company was now “operating from a position of strength.” The stock rose nearly 9 percent, its best day since late 2022.

“I think he’s been nothing but a phenomenal success story so far,” Dulio said. “The flow of news has been out of this world amazing, in terms of how they manage expectations.”

James Friedman of Susquehanna Raised its ranking On PayPal to buy in early July. He said Chris was “raising the bar” with his comments on CNBC, but said he was making good on his bold promise to shareholders.

“You know how he shocked the world?” Friedman said. “He actually beat his numbers.”

Much of Chris’ early success is tied to better transaction margins and better monetization of key acquisitions like Braintree, which leverages Meta Credit card processing, and for the payments app Venmo, which is becoming increasingly popular with businesses.

After trimming a lot of the fat in the organization and putting a new focus on profitability, Chris finally created some excitement on Wall Street after Dan Shulman, who retired as CEO after nearly a decade.

“It was time for some new blood at PayPal,” said Dana Stalder, a startup investor at venture firm Matrix Partners who served as PayPal’s commercial chief from 2004 to 2008. “He’s made changes very quickly, and I think he’s been very focused on the consumer, which is the right thing to do.”

Now comes the hard part – doubling the growth.

According to LSEG, when PayPal reports its third-quarter results in about a month, analysts are projecting revenue growth of about 6 percent. For the fourth quarter, they expect growth of 5.5%. Sales are expected to be only marginally stronger in 2024, with analysts expecting growth of less than 8% for the full year.

PayPal did not make Chris available for an interview for this story.

In a July earnings call, Chris said of the firm’s next steps, “While transformation will take time and we still have a lot of work to do, we are well positioned today, with the right leadership in place and full steam ahead. growing.”

Chris, who spent 19 years at the tax software provider. Intuit Before joining PayPal, it took a short time before he started overhauling the management team. In November, he brought Isabel Cruz Walmart As chief people officer, Michelle Gill from Intuit to run a new small business and financial services group, Diego Scotti from Verizon to oversee the consumer group as well as marketing and communications, and Jamie Miller From EY as CFO.

“He has replaced, from what I can tell, the majority of the leadership team,” Stalder said. “These are wholesale changes.”

Early in his tenure, Chris publicly identified some of the reasons, he believed, that PayPal was struggling to find its footing. He highlighted the over-aggressive strategy of expansion through deal-making.

“We’ve made a lot of acquisitions in the last few years, and we’ve been defocused,” Chris said in a January interview with Faber. “That was one of the things I saw 100 days ago when I came.”

Chris added that the company has narrowed its priorities down to five main things, “all focused on profitable growth.”

The most important metric to determine was transaction margin dollars, he said, by which the company measures the profitability of its core business. Among Chris’s strategies to deal with deteriorating margins was to add value-added services to merchants, such as connecting certain data points at checkout to reduce cart abandonment rates.

He said in January that 35 million merchants use PayPal and “when we improve their conversion rate, it improves their business, it improves our bottom line.”

PayPal noted in its latest earnings report to shareholders that its branded checkouts with Braintree and Venmo helped the company achieve its highest growth rate in transaction margin dollars. From 2021. Gross transaction margin increased 8% to $3.6 billion.

Susquehanna’s Friedman says a career at Intuit is the perfect training ground for learning how to master stock recovery. Talking to executives is like “talking to a dashboard,” he said.

“The source code to engineer more stock is profitable,” Friedman said. He added that Chris “really aligns his management style to the things that count” and “reducing what’s irrelevant”.

With Venmo, the goal is to turn one of the most popular choices for transferring money from a strictly consumer app, with no transaction fees, into a product for merchants. Door dash, Starbucks And Ticketmaster is involved in the business. Now accepting Venmo. As a method that customers can pay.

Company Started a national campaign. Last month for PayPal Everywhere, a 5% cashback offer for using a PayPal debit card in the mobile app. Farrell, the pitchman, can be seen in one. commercial Sing a parody of Fleetwood Mac’s “Everywhere,” using the PayPal app to buy lemonade and gas.

PayPal is behind Apple, Stalder says. Googlewhich owns the dominant smartphone operating system with its embedded digital wallets.

“PayPal is stuck because it’s less convenient than the No. 1 mobile wallet,” Stalder said. “And No. 2, it hasn’t worked offline.”

But Stalder sees a real opportunity for PayPal, in part because Apple already has it. Open the Secure element. on iOS so that other developers can more easily use the phone for contactless payments, putting them on a more equal plane with Apple Pay.

The development allows PayPal to “get on the mobile wallet rails for the first time and make some real progress in offline payments,” Stalder said.

PayPal’s second point-of-sale effort is called Fast laneA one-click payment option for online sales that integrates with Apple Pay and Shop Pay by. Shopify. In August, the fintech platform Aiden Made fast lane Available to businesses. in the U.S., and said it plans to expand the offering globally in the future.

Chris told investors on the earnings call that the company is making an immediate push to meet the holiday rush.

“We need to get it on as many platforms as possible so that small businesses in particular can just click a button and turn it on for the holidays,” Chris said. “We’re working with many of our larger organizations who want access to it even before the holidays.”

Venture capitalist Oren Zeff has seen Chris work with small businesses in another capacity. They served together on the board of a home design startup. Hosewhose customers include many architects and contractors.

“He obviously brought a lot to the table with his extensive experience with small businesses,” Ziff said. As a communicator, Zeff described Chris as “no drama” and “respected by all.”

While he’s quickly earned the respect of investors, who have grown PayPal’s market cap to more than $20 billion in the year since Chris started, there’s still a lot of work to do.

The stock is down about 75% from its record high. Shakhrani says shareholders are “anxiously awaiting its multi-year outlook” as opposed to just “trying to fix some broken things.”

“In the near future, there will be some pressure at some point for more appreciation around that,” Sukhrani said.

Chris, for his part, isn’t declaring victory.

“Our teams are moving quickly, excited about our innovation and focused on execution,” he said on the second-quarter earnings call. “We are still in the early stages of our transformation and while we are pleased with our progress in many areas, we know we can do much more and at a faster pace.”