In this podcast, Motley Fool analyst Jason Moser and host Deidre Woollard discuss:
- PayPal CEO Dan Schulman’s report card.
- What Alex Chriss might, or might not, bring to the party.
- If a potential deal for U.S. Steel could be a winner for U.S. infrastructure.
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
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This video was recorded on Aug. 14, 2023.
Deidre Woollard: A new CEO is set to take the helm at a major fintech and big drama at big steel, Motley Fool Money starts now. Welcome to Motley Fool Money I’m Deidre Woollard here with Jason Moser. Jason, how are you doing today?
Jason Moser: Hey, doing great. How about you?
Deidre Woollard: I’m doing great, I love it when there’s a Monday with some fun news or at least some interesting news. I was excited to see that we have a new PayPal CEO announcement on the day we have Mr. War on cash himself in the house. It feels like fate to me. We’ve known for a while, Dan Schulman was on the way out as the CEO of PayPal. But now we know who’s on the way in and it’s Alex Chriss who hadn’t really heard of felt like a dark horse candidate to me, he did 19 years at Intuit, most recently Executive Vice President and General Manager of Intuit small business, and self-employed group. Young guy, most of his experience at one company, what’s your take here?
Jason Moser: Yeah. I mean, this is perfect timing. I mean, I just spent the morning Venmo-ing cash to my two daughters. Just listen, this stuff works and I do really appreciate the fact that we can do it. I said on Friday show a couple of weeks ago that it really felt like PayPal could have taken the entire year off of reporting earnings, and just pick up when they actually announced a new CEO. Because to me that’s been really the biggest storyline with the company over the last several quarters. Once we knew that Dan Schulman was was going to step down. Anytime you see a CEO announce that, well of course, the next question goes to who’s going to fill his role, and then what are their priorities is going to be. I think that this PayPal’s well-established business. They serve a lot of people, and a lot of businesses around the world. But it’s also a business going through some growing pains right now in waiting for a new leader to take the reigns. You don’t know where this business wants to go. What are the priority is going to be, will new leaderships priorities lineup with former leadership, and that remains to be seen. But I do think, just from looking at at the information, reading a little bit about Alex Chriss. I think this is a sensible hire. Alex has the experience with Intuit running the small business, and self-employed group, as you noted, and that is a big deal because that essentially accounts for about half of Intuit’s overall revenue, and any considerable a crucial component of the company’s overall operating profit. Certainly a lot of experience there, and I like that you’re getting someone who has a lot of experience in that finance and tech world. It should be familiar place for him, I think to get settled and start trying to take this company forward.
Deidre Woollard: Well, you’re really replacing someone who’s been with the company since the spinoff in 2014 from eBay, he’s going to stick around until 2024. That gives him the good 10-year run. Backs on Dan Schulman have been I feel like mixed, like in the beginning, started the company, he’s the hero, PayPal’s just crushing it. Less so dow baby on the whole how do you think he might be remembered as a CEO?
Jason Moser: I do think that’s a good question. It’s something we’re thinking about because it’s been a little bit of a bumpy ride before there was a stretch where it felt like he could do no wrong. I think on the whole, he’ll likely be remembered more positively than not. But, he’s led the way on some acquisitions that make you wonder, some things that haven’t panned out as well as I’m sure he’d have hoped. He was really big on that super app concept, not all that long ago. Making PayPal’s this destination where you can get all of your financial affairs and order in. I just don’t know that’s really what people want. I think they came to that realization pretty quickly, and they they pulled back on that, realized they needed to focus more. He seems like a fairly humble guy at the end of the day. We’ve certainly heard in calls more recently acknowledging some mistakes along the way and nobody is perfect. He’s going out, I think with a few more question marks that he would care for. Certainly from a stock performance perspective, he’s going out with unfortunately, a bit more of a whimper during his tenure from July 20th, 2015 to now. You’ve made money if you are an investor in PayPal, but, the stock has only returned about 70%, and it’s trailed the broader market. There was a peak in there during the last several years, were really it looked like the sky is the limit for this company. He certainly had a track record before PayPal. He was the president and COO and then ultimately the CEO of priceline.com. He was only there for a short period of time, but saw a considerable revenue growth with Priceline’s. He has a good track record, I think timing, as they say in life is everything, and he’s probably leaving at a time where there will be some more question marks than probably he deserves. But the market as as investors, we are ever forward-looking.
Deidre Woollard: I felt like the super app idea is something that a lot of companies are chasing. We’ve talked about it before on the podcast. It’s harder to pull off than it, it’s a great buzzword, but it’s harder to pull off than it sounds sometimes.
Jason Moser: It is, and II don’t know that people really want that. I know you’re seeing Elon Musk in with Twitter or X or whatever you want to call it. That’s the goal there, I just don’t know that is going to work, because I just don’t know that’s what people want. I know that he’ll quickly point to something like WeChat in China. While it is correct, that’s a super app in that part of the world. I think that’s very culturally specific too, I just don’t think that generally is what folks want. In investing we talk about it all the time, you don’t want to put all of your eggs in one basket. Generally speaking, in life, I think that’s pretty good advice which makes me think this super app concept just isn’t really going to gain any traction anytime soon.
Deidre Woollard: Bill Mann pointed out recently that WeChat gained prominence because there was nothing else. That’s not the case when you’re trying to make a super app in the U.S. whether it’s Uber or PayPal or any of them. We’ve got a lot of super apps that aren’t necessarily, super apps.
Jason Moser: That’s a great point.
Deidre Woollard: Well, we got a question from our producer Ricky Mulvey, which was, what would you ask Dan Schulman in his exit interview?
Jason Moser: What would I ask Dan Schulman in his exit interview? Wow, that that’s an interesting one. I loved to know his honest thoughts regarding the honey acquisition. I’d ask him a lot of questions, but one that stands out to me because I’m still not certain. It’s really one that worked out as well as he would’ve hoped, and they paid a good chunk of change for it as well. But in hindsight, would he have acquired Honey knowing what he knows today? I think that would be at least an interesting place to start because again, you look at some of these acquisitions they made. They haven’t really worked out as well as probably they would have hoped. There was this recent rumor with Pinterest. I think the Pinterest rumor, we started to see a lot of investor pushback. There were a lot of people are out there just like what in the world are you thinking about, Rajahs. Stop it with these silly acquisitions and focus on getting your business back on the right track. From that perspective, looking back at the Honey acquisition and getting unfiltered and honest thoughts on that. I’d be curious to know that.
Deidre Woollard: Acquisitions is an interesting thing because you’ve got Alex Chriss coming in. He’s gets credit into its acquisition of Mailchimp, which was also an acquisition that didn’t necessarily feel like it was a fit. It’s turned out pretty well so far. Do you think that given PayPal’s past history of acquisitions, Alex Chriss coming in and thinking more acquisitions or maybe not so many acquisitions?
Jason Moser: Well, while I was going through the exercise of assessing this higher, you look at pros and cons and I mean the pros, strong background in tech and finance with intuitive is somewhat of a proven entity in that regard. But the OneCon that really stood out to me and it’s really more of a question mark is regarding acquisitions. The Mailchimp deal seemed like it worked out OK. But that would be really my question is going forward, is this a company in PayPal that feels like acquisitions are going to be a priority because it doesn’t feel to me like it necessarily needs to be. I feel like there are plenty of organic growth opportunities left for PayPal before they really need to start looking at acquisitions. Acquisitions can be good. If you’re bringing in something where it gives you new capability, new functionality that, that the customers are demanding. But oftentimes acquisitions, they don’t work out as well as they as the headlines say at the time. I’d love to knows his perspective at least in the near-term, where is his mind in regard to acquisitions? Because honestly, I would much rather see focusing on getting this business back on track and you get this huge network of users to very valuable platforms in Venmo and PayPal alone just seems like a lot of opportunities there. It’s not the con, but at least it’s the question mark I would have.
Deidre Woollard: Yeah, I think acquisitions, we get very excited about them in the beginning and then we check in a year later and they’ve been tucked us out. Does not always workout.
Jason Moser: One more common than we tend to realize.
Deidre Woollard: Yeah, we had another CEO announcement this morning. Carlos Abrams Rivera is taking over at Kraft Heinz. This is a different story. Someone who’s been with the company off and on for a while. Thinking about these two stories at PayPal this is big news, at Kraft Heinz, maybe not so much. Sometimes it seems like you want a fresh face from outside. Sometimes it seems like you just want someone who knows the company pretty well. It seems like that’s what’s happening at Kraft Heinz. Do you think with PayPal they really needed to have that fresh face because they are at a little bit more of an inflection point?
Jason Moser: Well, one thing is for certain is the status quo with PayPal right now isn’t working. Something definitely needs to change and getting that fresh set of eyes often can do that. It’s not to say that Showman didn’t know what he was doing. Clearly he did. But he also went through in exceptionally an abnormal stretch here over the last three years where and I mean, certainly PayPal wasn’t the only business. I think, these last few years threw a monkey wrench in virtually every executives plans. But we’re obviously well past that and moving forward now and so getting a fresh set of eyes, they can maybe focus less on the legacy problems and more about the path going forward. Sometimes it can be something just that simple. It’s an exciting time for sure, particularly for a business like PayPal or you’ve got a company like Heinz. They’re dealing with a different set of issues there. But with PayPal, you see so many opportunities in this space in the coming years, it would really be ashamed to see a company with this type of network not able to capitalize on that.
Deidre Woollard: Yeah, absolutely. Well, let’s turn to a far more stayed industry. Steelmaking, things got dramatic though last night with U.S. Steel and Cleveland-Cliffs and break it down quickly. US delay trade under TICKR X, they spurned an offer from Cleveland-Cliffs, which is a larger steelmaker. Together, they would have created one of the world’s biggest steel companies. It was a war of the press releases last night. US deals saying get rejected the offer partly because Cleveland-Cliffs didn’t sign an NDA. This deal apparently has been in the works for about a month. Now, it’s all public. Now it’s all out there. We know Cleveland-Cliffs was going to pay it around 42% premium to acquire U.S. Steel. US deals open letter to Cleveland-Cliffs. They left the door open for negotiation. Is this just a little brinksmanship happening here? Could this deal still happen?
Jason Moser: I think it could still happen. This does feel like a negotiation tactic perhaps. This is obviously an industry where we’re seeing a lot of consolidation. The deal itself, meaning it would value U.S. Steel at around $7.2 billion and that’s around five-and-a-half times trailing net income. That’s not really a bad price based on historic multiples here. But again, if you’ve got multiple unsolicited offers, well, there’s clearly some interested parties there, and that means there’s a lot to go through, there are a lot of things to consider and you don’t want to be hasty in a time like this. I certainly understand their decision to go ahead and try to take this more slowly.
Deidre Woollard: I never know about the multiple offers that always feels to me like when a real estate agent says, oh, we have multiple offers on a house and maybe they do and maybe they don’t.
Jason Moser: Part of the negotiation tactic.
Deidre Woollard: Absolutely. There’s another aspect to this. This is interesting, is the United Steelworkers. According to their collective bargaining, they have the right to counter any proposal to take over U.S. Steel. They published a letter saying they endorsed the transaction with Cleveland-Cliffs. They wouldn’t endorse anybody but Cleveland-Cliffs. Cleveland-Cliffs, of course, they published this on the link to it on their website. They’re very proud of this. They think this is their big bargaining chip. But the only thing I was wondering is does that mean the US deal could be sold, it couldn’t be sold entirely to someone else, but are there parts of it that might be valuable and could the deal happen that way?
Jason Moser: Well, I know they certainly are looking at it from that perspective. I guess it really just boils down to what kind of teeth that endorsement ultimately carries. Then a counter offer on the part of the steelworkers, that doesn’t imply that U.S. Steel would actually have to accept it. But it certainly makes the United Steelworkers positioned very clear here.
Deidre Woollard: Yeah, absolutely. It’s funny because we don’t really talk about U.S. Steel a lot. I happen to be reading Ron Chernow’s book from the 1990s, House of Morgan, which is really fascinating, it talks about J. P. Morgan‘s original creation of US deal in 1901. Thinking back on this and this was the biggest corporation in the world at one point, I mean, founded by J. P. Morgan and Andrew Carnegie, Charles Swad, some others like these giants. Now, it’s no longer even in the S&P 500. We don’t think about it much in today’s world. But U.S. Steel and Big steel, are they still important for the US? I know we’re no longer the biggest steelmaker, that’s China, but still does matter to the US, doesn’t it?
Jason Moser: It absolutely does. I mean it’s fascinating to think about something that is so crucial to our nation’s infrastructure as really not being that great of an investment. But frankly, that’s what it’s been, I mean, at least from a buy-to-hold perspective. I mean, if you’re just buying these shares and hanging onto them, I mean, this just hasn’t really worked out all that great over the last several years. Now, there are cycles to these things and in much like energy, if you can time those entry and exit windows, then more power to you. That’s a little bit of a different style of investing than we typically embrace here at the Fool, obviously. At the end of the day, steel, it’s a commodity. There’s not really necessarily a competitive advantage, so to speak, in the product, maybe as much as a competitive advantage and the way the business is set up. I think that’s one of the bigger concerns with U.S. Steel. It’s a legacy operation that hasn’t been modernized to the extent that some of it’s competition has, namely Cleveland-Cliffs.
Jason Moser: It’s always interesting to think about that. You made the point about steel not just being a domestic product here. We deal with the global supply chain in regard to that and there are tariff protections that try to encourage domestic production in stifle or make it more costly, at least, for importing. I suspect we’ll probably see that continue.
Deidre Woollard: Yeah, and you’d think that a company like this might be a good dividend payer. It hasn’t. Dividend yield less than 1%, it’s not a great dividend play at all.
Jason Moser: No, and it’s such extremely capital-intensive. Making steel, that requires a lot.
Deidre Woollard: The only thing I’m thinking about is, given what we know about the push for infrastructure and US domestic products, you’ve touched a little bit on the tariffs, given that we might see a real infrastructure push, we don’t want to time the market, but is there a potential growth for steel? If this company were to come to pass, would obviously have, hopefully, grab a bigger market share?
Jason Moser: Well, yeah. That’s something that always pay attention to. We look at bigger picture macro-forces that can drive markets like these. Looking at semiconductors, for example, in the recent developments in regard to the CHIPS Act and trying to bring more of that at home as we deal with this ongoing growing demand, I think it really boils down to understanding the demand forces at play here when it comes to steel. That can be a little bit trickier because so much of that depends on actual federal funding and how states and municipalities are all going to approach this on their own terms. It can be very difficult from a timing perspective, but there’s absolutely no question about it. Anytime you look at the state of our national infrastructure, it always seems to be that we’re getting that C grade. It’s like a C or a C+. It always needs to be a little bit better. That, I don t know ever we’ll actually go away, but you would hope that, that does continue to spur some demand, which ultimately could create some opportunities for investors in the space. But, again it’s such a difficult one to time. We always talk about timing and I think that’s what makes energy so difficult. It’s just these things go in cycles. It really takes a lot of attention into understanding the cycles and what drives those cycles. If you can dig in and really comfortable with understanding the nature of those cycles and that drive them, there’s absolutely money to be made, but again, it’s a little bit of a different style of investing, so I think you need to take that into consideration.
Deidre Woollard: Yeah, anytime you’re trying to figure out when something is going to be built in real estate. Certainly, I’ve seen so many timelines go so far wrong because so much of it is dependent on the economic cycle, so there can be plans to have something be built. We saw it during the great financial crisis. A lot of things were going to be built and then were not built because the financial situation shifted.
Jason Moser: Exactly.
Deidre Woollard: Well, let’s wrap up with something silly. I like to wrap up Mondays with something silly. There’s two things we added update on, it seems like every week this summer, which is Barbie Box Office and the Mark Zuckerberg’s cage batch. Barbie Box office, one of those is on-track to do, it could be the biggest movie the whole year. Before spring, it’s on, it’s off again. Zuckerberg said on Threads, I think he’s just trying to drive attention to Threads, [LAUGHTER] “I’m moving on. I got to deal with people who are serious about cage fighting. This isn’t Musk.” What do you think? Is it going to happen or not?
Jason Moser: This is really bizarre. I can’t imagine in what world this seems like a good idea. [LAUGHTER] First-world problems, I guess. I think, that Zuck is doing the smart thing here. I just don’t know that many, if any, really thought that Musk is actually serious about this. I certainly did. I take everything he says with a huge grain of salt, but when you just look at the state of this, you get Zuckerberg, because he’s 12 years younger, is clearly in better shape. He’s far more proficient in this arena, he’s been training mad. This is something he really cares about and takes very seriously. It just doesn’t make sense.
You can always take any crazy idea, and if you throw the word charity in there, then it makes a lot more sense. Perhaps from that perspective, they feel like there’s a real opportunity from a charitable perspective, and that’s great. Again, I don’t know that I ever thought this would happen, to begin with. Frankly, if I’m an investor in one or more of Elon Musk’s companies, and I’m not, but if I were, I would look at this, and think, you know what, this is not good, because it’s going back to that, all of your eggs in one basket notion there, Musk is running a lot of different companies and doing a lot of different things. If that guy goes out of commission for anything, it’s going to throw a lot of question marks out there.
There are going to be a lot of question marks in regard to what the future holds for many of these businesses. We just saw the CFO stepped down from Tesla. He was viewed as a potential successor to the CEO role if and when Musk decides to step down from that. With Mark Zuckerberg, you feel like at least if he was injured, he’d be able to recover more quickly because he’s so much younger. There was no real point where any of this made any sense. I think Musk is a guy where he shoots first and aim second, and you have to take everything he says with grain of salt, I think.
Deidre Woollard: I think the reason I like this story is, their particular styles are very in-display here. Zuckerberg, he tends to have short, intense burst to focus on things. He has that thing where every year he tries something. He learned to kill his own animals, he can really zero-in on things. Musk is the opposite.
Jason Moser: He’s the total opposite. What’s the new shiny toy today? That’s got his attention. Sometimes that works out very well, sometimes not so much, but I think just in seeing how seriously Mark Zuckerberg has taken this, it’s something that is important to him, seems like it’s something he enjoys, it seems like something he wants to be really good at. We’re talking about an actual physical battle here, we’re not talking about playing chess.
Deidre Woollard: Good point. Well, thanks for your time today, Jason.
Jason Moser: Thank you.
Deidre Woollard: As always, people on the program may have an interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don’t buy or sell stocks based solely on what you hear. I’m Deidre Woollard. Thanks for listening. We’ll see you tomorrow.