To The Moon

Insiders Are Buying Up Shares.

Nearly two years of gains have been wiped from PayPal Holdings’ market value since the payments company reported a disappointing fourth quarter with cringe-inducing guidance after the market closed Feb. 1.

The next day, the stock had its biggest percentage drop—25%—since spinning off from eBay in 2015. Three insiders, including PayPal’s top executive, stepped up and bought $2.5 million of shares.

PayPal (ticker: PYPL) stock wasn’t done falling that historic day, or that week. Shares have continued to slide, setting an intraday low of $115.29 on Friday. The stock hasn’t traded at that level since April 2020.

Barron’s noted that PayPal “undermined its credibility” with its fourth-quarter report, which was mixed, and guidance, which was a surprise to the downside. PayPal scrapped its 2025 goal of reaching 750 million active users—a target it had backed just the previous quarter. It slashed the 2022 outlook for new users to 15 million to 20 million, less than half the 49 million new accounts added last year.

On Feb. 3, we said investors shouldn’t rush to buy the stock, but on that day PayPal President and CEO Dan Schulman paid $1 million for 7,994 shares, an average per-share price of $124.57. Schulman now owns 196,544 shares, according to a form he filed with the Securities and Exchange Commission. This was his first open-market purchase of the stock since he became CEO in July 2015; most of his shares were received for his services to the company.

PayPal declined to make any of the insiders who bought stock available for comment. It also declined to comment.

PayPal director David W. Dorman paid $1 million on Feb. 8 for 8,400 shares, an average price of $119.33 each. Dorman, a director since June 2015 and a former AT&T (T) CEO, now owns 53,880 shares. His only other purchases of the stock on record were in November, when he bought 1,547 shares through family trusts for $288,500, an average per-share price of $186.47.

PayPal director Frank Yeary paid $500,000 on Feb. 4 for 4,000 shares, a per-share average price of $124.85 each. Yeary, who has been a director since July 2015, bought the shares through a trust. Besides those shares, Yeary, a manager at private investment firm Darwin Capital Advisors, also owns 26,719 shares in a personal account.

PayPal has been buying back stock, repurchasing 15.4 million shares in the fourth quarter for $3.4 billion. Chief Financial Officer John Rainey referenced the steep drop in the stock price in the fourth-quarter buy-side conference call: “I’m a buyer right now, and I was a buyer at our prices last quarter. I think that, look, I’m very disappointed in where we are today.” Rainey was speaking about the company purchasing stock; he hasn’t purchased any shares on the open market since joining the company in August 2015.

Rainey said PayPal generally conducts stock buybacks through a trading plan that automatically executes trades “based upon where our price is trading relative to the overall index and also versus our historical trading averages.”

Credit Suisse analyst Timothy Chiodo noted in a Feb. 2 research report that he expects stock repurchases to remain at $3.4 billion in 2022. But considering the hit the stock price took, and the automated nature of stock repurchases, buybacks this year could far exceed that.

Chiodo rates PayPal stock at Outperform, but lowered estimates and cut his target price to $190 from $250.