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PayPal’s Profit Growth Focus Slows Unbranded Business, Shares Drop 10%

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PayPal’s shares fell nearly 10% on Tuesday after the digital payments giant reported a sharp slowdown in its unbranded card processing business growth and a shrinkage in its operating margin during the fourth quarter. The company’s unbranded payments, which involve transactions for other firms rather than PayPal itself, had experienced strong growth in recent years but traditionally operated on low margins due to intense competition.

Under CEO Alex Chriss, PayPal has focused on “profitable growth” and revamped its pricing strategy, particularly for its Braintree product (the non-PayPal branded checkout service), which has led to some customer losses. In the fourth quarter, total payment volume growth for unbranded payment processing slowed to just 2%, a significant drop from 29% the previous year. Despite this, the focus on profitable growth has improved overall profitability.

Branded product growth, which includes services like Venmo where consumers and merchants interact within PayPal’s platform, also fell short of analysts’ expectations, increasing by only 6%, below the expected 7%. This outcome overshadowed an optimistic forecast for 2025 profit growth that surpassed Wall Street estimates.

The results come amid increasing competition in the digital payments space, with technology giants like Apple and Google, along with traditional card networks like Visa and Mastercard, expanding into PayPal’s core market. This competition has intensified as more consumers turn to mobile payment options such as Google Pay and Apple Pay.

Despite a contraction in adjusted operating margins by 34 basis points to 18% in Q4, PayPal’s shift towards high-margin products helped the company close the year with an expansion in margins, rising 116 basis points to 18.4%.

CEO Chriss, who took over in late 2023, emphasized the company’s commitment to focusing on high-margin products and optimizing its offerings for better profitability. PayPal’s new initiatives include a “one-click” checkout feature called Fastlane and forming new partnerships to strengthen its market position.

Looking ahead, PayPal expects its adjusted profit for the full year to grow between $4.95 and $5.10 per share, surpassing Wall Street’s estimated $4.90 per share. The company reported an adjusted profit of $1.19 for the fourth quarter, exceeding estimates of $1.12. Its revenue for Q4 rose by 4% to $8.4 billion, and total payment volume increased by 7%.

 

Kadokawa Shares Fall as Sony Announces Investment, Not Acquisition

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Shares of Japan’s Kadokawa, a media conglomerate known for its role in creating the hit game “Elden Ring,” plummeted by their daily limit on Friday after the company announced a capital partnership with Sony Group instead of the expected full acquisition. The two companies revealed that Sony would invest approximately 50 billion yen ($317 million) in Kadokawa by acquiring a 10% stake through a new share issuance.

Stock Impact

Kadokawa’s stock fell sharply by 15.95% on Friday, ending the day at 3,689 yen, the daily limit, as sell orders overwhelmed the market. This comes after a surge of about 45% in Kadokawa’s stock price over the past month, fueled by reports of potential acquisition talks with Sony. Analysts pointed out that investors had expected a premium offer through a tender bid, which did not materialize, contributing to the sharp drop in Kadokawa’s share price.

Market Reaction

The investment from Sony, while making it the largest shareholder in Kadokawa, was seen as a disappointment by some market participants, especially given that the sale price of 4,146 yen per share was a discount of more than 5% compared to Kadokawa’s closing price the day before. Analysts like Shunki Nakamura from Jefferies also noted that the move would be dilutive due to the new share issuance.

Strategic Goals

The deal between Sony and Kadokawa is aimed at enhancing Sony’s position in the growing anime market, with Kadokawa’s publishing business playing a key role in the creation and distribution of anime content. However, while the partnership stops short of a full acquisition, there is potential for increased collaboration and future moves toward a larger stake in Kadokawa, according to analysts.

Sony’s Position

Despite the negative reaction in Kadokawa’s stock, Sony’s shares rose by 2% in the morning and ended the day with a modest 0.7% gain. Traders noted that this more limited partnership with Kadokawa would free up Sony to allocate capital to other projects.

 

Nissan Shares Plunge Over 10% Following Disappointing Results and Production Cuts

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Shares of Nissan Motors dropped as much as 10.12% on Friday, hitting a four-year low, after the company posted disappointing quarterly results and announced plans to cut global production capacity by 20%.

In its second-quarter results for the period ending in September, Nissan reported a net loss of ¥9.3 billion (approximately $62 million), a stark contrast to the ¥190.7 billion profit recorded in the same quarter last year. Operating profit fell nearly 85%, plunging to ¥31.9 billion, while revenue dropped by 5% to ¥2.99 trillion.

The company also revised its full-year financial outlook downward, lowering its revenue forecast to ¥12.7 trillion from ¥14 trillion and slashing its operating profit projection to ¥150 billion, down from ¥500 billion.

In response to the challenging situation, Nissan announced plans to reduce its workforce by 9,000 employees and implement cost-cutting measures. These efforts include rationalizing its asset portfolio and focusing on capital expenditure and research and development. The company is targeting a reduction of ¥300 billion in fixed costs and ¥100 billion in variable costs for the 2024 fiscal year.

Additionally, Nissan’s board decided not to issue an interim dividend and scrapped the year-end dividend forecast. CEO Makoto Uchida will voluntarily forfeit 50% of his monthly compensation from November, with other executives also opting for pay cuts.

Nissan’s sales volume for the first half of its fiscal year declined by 1.6%, with 1.6 million units sold. The company aims to return to profitability and positive cash flow by fiscal year 2026, even with annual sales of 3.5 million units.