PayPal Earnings: PayPal-Branded Volume Picks Up

Overall, we think PayPal recorded a strong start to the year. In our view, the key positive was the modest acceleration in growth for PayPal-branded volume. We believe the company’s narrow moat is driven by a scale-based cost advantage. As such, maintaining share in its most profitable business is important to maintain the company’s moat over time. We’re encouraged to see PayPal outperforming expectations now that new CEO Alex Chriss is in place and take this as a positive sign going forward, although the company still has work to do to get fully back on track. We will maintain our $104 fair value estimate and see the shares are undervalued.