PayPal Will Lay Off 7% of Its Workforce

It has been reported by MarketWatch and others that PayPal will lay off 7% of its workforce as the company continues to focus on reducing costs amid a relatively soft growth environment. Improving margins has increasingly been a focus for management over the past year, possibly in part due to pressure from activist Elliott Investment Management, and this looks like another step in that direction. We continue to believe the company has potential to meaningfully improve margins over time, as we believe a number of factors that have negatively affected margins historically (the move away from eBay, the buildout of new platforms like Venmo, and inefficient spending in the beginning of the pandemic) will not be significant issues going forward, and the business is naturally scalable, in our view. We will maintain our $135 fair value estimate and narrow moat rating.