PayPal's Branded Checkout Button Poised for Growth Amid China's Temu Surge: Analyst

Mizuho analyst Dan Dolev reiterated PayPal Holdings Inc PYPL with a Buy and a $92 price target.

The moat of PYPL's highly profitable Branded Checkout button has been a critical debate surrounding the stock. 

On this front, Dolev sees potential good news from China that could help reinvigorate Branded Checkout growth. 

In September 2022, PDD Holdings Inc PDD launched its U.S. online marketplace dubbed Temu, which offers deep discounts on goods shipped mainly to U.S. consumers from China. 

PYPL is among the payment options available at purchase when checking out on Temu. 

The analyst's proprietary web traffic analysis shows that Temu - an Amazon.Com Inc AMZN-like marketplace for discounted goods from China - is rapidly gaining popularity. 

According to SimilarWeb, visits to Temu's website (either by internet browser or mobile app) have increased from ~7 million in September 2022 to 75 million by January 2023 to nearly 300 million in August 2023. 

Per SimilarWeb, Temu comprised ~2% of incoming web traffic to PYPL in August, 2.5x higher than its share of incoming traffic to PYPL in January and more than 12x higher than a year ago.

As Temu grows in popularity, it would be more meaningful to PYPL's Branded business.

Price Action: PYPL shares traded lower by 0.38% at $64.20 on the last check Friday.