PayPal's Downsizing Was Needed For Leaner Cost Structure, Analyst Says

Mizuho analyst Dan Dolev reiterated Buy on PayPal Holdings, Inc PYPL with a price target of $105.
PYPL shared plans to reduce headcount by ~7%, or 2,000 employees.
With over 30,000 employees, the analyst believes PYPL was overstaffed, so a leaner cost structure should be well-received.
The analyst estimated that reducing headcount by 2,000 could drive roughly $400 million in cost savings or 100-150 bps margin upside.
The analyst believes these cuts were needed, as they should help PYPL get more on par with peers like Visa Inc V and Mastercard Inc MA regarding employee efficiency.
The analyst estimated that in 2021, PYPL generated ~$500K of revenue per employee vs. $500-600K at Adyen and $750K-$1M+ at the networks.
PYPL blames the "challenging macro-economic environment" as a key reason for the cost reduction.
The comments appear more cautious vs. the more upbeat commentary by V and MA management last week about the general macro.
Given the recent challenges, the price target reflected a discount to V & MA.
Price Action: PYPL shares traded lower by 1.80% at $80.02 on the last check Wednesday.

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