PayPal Earnings: Growth Slows Modestly Sequentially

PayPal's growth slowed a bit in the second quarter from the strong start it saw during the first quarter, and management's guidance suggests growth in the third quarter will roughly mirror results from the second quarter. While we think the market might focus on the deceleration, PayPal is tracking in line with our expectations for the full year, and we are encouraged by management's comments suggesting that the company is approaching a positive inflection point. We will maintain our $135 per share fair value estimate for the narrow-moat company and see the shares as materially undervalued.