PayPal was regaining its footing last year after falling short of growth goals in 2022, but now it faces an e-commerce slump. Some industry observers are wondering out loud whether a new CEO will step in for the challenge.
PayPal CEO Dan Schulman tried to reset the company’s priorities last year, but the worsening economic conditions are making his job tougher after consumer demand flagged at the end of last year.
It’s against this backdrop that the analyst team at Truist Securities recently suggested in a report for their investment clients that Schulman’s exit is a possibility, noting he’ll turn 65 this month.
“We would not be surprised by C-suite changes this year,” the analysts said in the Jan. 3 PayPal note. The report noted Schulman’s successes since taking on leadership of the company in 2014, including “a remarkable 12% customer” compound annual growth rate, but suggested he could leave now without tarnishing that image. “We think he could move on from PayPal, legacy intact.”
Schulman hasn’t said anything about when he might retire, and a spokesperson for PayPal declined to comment, calling the Truist report “speculation.”
Schulman’s long PayPal tenure
Schulman took the top post at the payments behemoth as CEO-designee in 2014, and added CEO and president titles formally in July 2015. Nike CEO John Donahoe has served as PayPal’s board chair for that period.
Given Schulman’s long-time leadership, it would be a major change for the San Jose, California-based company to bend to a new strategic vision.
And PayPal has already been adjusting to change in recent years. When the company began falling short of customer acquisition growth goals in 2022, Schulman shifted the company’s focus to increased engagement of customers, even as it targeted more accounts, too. Soon after, Chief Financial Officer John Rainey left for Walmart.
Then last year, with activist investment firm Elliott Investment Management leaning on the company, PayPal sharpened its focus further. Schulman staked out priorities that included reducing the time it takes for check-out; eliminating a reliance on passwords; and drawing more consumers to its buy now-pay later services.
Rainey’s departure “could be a pre-cursor” for Schulman’s exit, too, Truist Analyst Andrew Jeffrey said by email, noting that Rainey’s move was a “promotion” for him. Asked what the timing might be for Schulman, Jeffrey said: “I don’t have a thought on precise timing, but I’d think he’ll have a chance to put up results early this year.”
Potential new direction under changed leadership
In their lengthy report on PayPal, titled “Time for a bold change,” the Truist analysts upgraded their rating on PayPal’s stock to “buy” from “hold,” expressing confidence in its ability to grow, especially as e-commerce recovers, and noting the possibility of a new CEO.
A new CEO might be able to move PayPal in new directions, the Truist analysts said. “A new CEO would be positioned to build on Mr. Schulman's success, in our opinion, while also wielding a freer M&A hand, perhaps moving the (company) into card present acquiring, expanding its (total addressable market) and boosting terminal rev/EPS growth,” the Truist note said.
Wolfe Research analysts were less sanguine about PayPal’s near-term prospects in a broader Jan. 5 industry report. They noted PayPal’s “potential to grow revenue” but said they “remain on the sidelines as we await proof points that (the) company can hold its market share and execute on driving incremental engagement within its customer base before becoming constructive on shares again.”
At least one other analyst agrees a Schulman exit isn’t a far-fetched idea. Mizuho Securities Analyst Dan Dolev said by email that he hadn’t heard anything specific about Schulman heading for the door, but noted he “wouldn’t be surprised given (Schulman’s) age/tenure.”
CEO turnover at ‘record pace’
A top Chicago recruiter who has worked with PayPal in the past echoes that sentiment. “I’d be surprised if a move isn’t made at the top of the house at PayPal this year, but not owing to Dan’s ability or accomplishments,” said Crist Kolder Co-Managing Partner Josh Crist. “Given his age profile and business performance (fraught with macroeconomic challenges), we may see a move made.”
Nonetheless, Crist said not to underestimate Schulman, noting he’s “got the energy of a much younger man, and strategically has seen just about everything.”
Schulman himself acknowledged the economic challenges during the company’s third-quarter earnings call with analysts. “We think that e-commerce is going to be pretty muted in the fourth quarter and right now we are not planning that that comes back for any reason as we look into 2023,” Schulman said on the earnings call with analysts in November.
If Schulman does decide to leave, he wouldn’t be the only payments CEO headed out the door. A string of payments companies have announced exiting CEOs in recent months amid the economic turmoil, including at Visa, Green Dot, Fidelity National Information Services and ACI Worldwide.
And the payments industry isn’t the only place where there’s been a rise in CEO exits. There has been a “record pace” of CEO turnover over the past year, Crist said. “With macroeconomic headwinds potentially on the horizon, expect this rate of turnover to continue,” he added.