Shares in PayPal Holdings fell Wednesday on word Chief Financial Officer John Rainey plans to leave the online payment site for retail giant Walmart. PayPal stock had plunged 42% in 2022 and 65% from its all-time high prior to the management change.
It was revealed late Tuesday that Rainey will take the same CFO post at Walmart, which has more than 22 times the annual revenue that PayPal currently produces. Rainey will remain at PayPal until late May, the San Jose, Calif.-based company said.
"John Rainey's departure may be perceived as negative signaling. (It) could potentially refresh fears around the company's ability to sustain above-market growth and reach financial targets," Morgan Stanley analyst James Faucette said in a report to clients.
He added: "At the same time, there may be some relief among investors. There had been speculation around a change in senior leadership given recent earnings misses and related sell-offs of PayPal's stock."
Amid the CFO's departure, PayPal stock dropped 2.9% to close at 105.17 on the stock market today.
PayPal Stock: No Guidance Update
"PayPal's CFO departure is not surprising following a period of overpromising and under-delivering," Mizuho Securities analyst Dan Dolev said in his note to clients. "The more worrisome development is that the announcement was not complemented by a guidance update."
One PayPal stock analyst, though, said Walmart should benefit from Rainey's experience.
"With the lines blurring between retail, e-commerce and fintech, Walmart's new CFO, John Rainey, should have a set of experiences and competencies that will be useful to this retailer," UBS analyst Michael Lasser said in a note.
He added: "Having spent time at PayPal, Mr. Rainey helped usher in change at a large organization. Plus, he navigated the complexity of an intensely competitive and dynamic industry."
Rainey had served as CFO of United Airlines prior to joining PayPal in 2015.
Interim CFO Appointed
Meanwhile, PayPal appointed Gabrielle Rabinovitch, senior vice president, corporate finance and investor relations, as interim CFO.
"While execution had become an issue for PayPal recently with two consecutive quarters of lower guidance, we do not think the Street anticipated such a sudden departure of the CFO," said Bank of America analyst Jason Kupferberg in a report.
PayPal reported December-quarter earnings and total payment volume below analyst estimates. The company's 2022 profit guidance and its outlook for customer growth missed as well. In addition, PayPal abandoned five-year financial targets.
Former parent eBay spun off PayPal stock in 2015. Also, eBay's shift of its payment processing from PayPal to Netherlands-based Adyen is nearly complete.
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