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On the surface, it seems surprising that PayPal's (PYPL) mixed Q3 earnings report is sparking a rally in the stock. The company did exceed EPS expectations, but other key metrics -- such as total active accounts -- painted a far less rosy picture. Furthermore, the company also issued downside EPS and revenue guidance for Q4, making the stock's move higher seem all the more improbable.

• Those blemishes, though, are taking a back seat to the promising comments made by new CEO Alex Chriss, who took the reins from long-time CEO Dan Schulman on September 27. During the earnings call, Mr. Chriss pounded the table on his plan to drive profitable growth by managing the cost base, simplifying the business structure, and improving operating leverage.
  • Therefore, market participants are looking beyond the Q3 results and weak Q4 outlook and are instead focusing on the possibility of stronger profits and growth in 2024.
• It doesn't hurt that the broader market is also rallying today on hopes that the Fed may be nearing the end of this rate-hiking cycle. Higher interest rates have been especially tough on fintech companies like PYPL, Affirm (AFRM), and Block (SQ) as consumers pull back on spending and loans. 

Some relief on interest rates would certainly be welcomed for PYPL as Mr. Chriss attempts to execute a turnaround. 

• In Q3, total active accounts declined by 2.8 mln to 428 mln, continuing a concerning downward trend that has put the competitive threat from big tech under the spotlight. However, the active account losses may not be quite as bad as they seem. That's because PYPL is flushing out lower quality active accounts, many of which are located in Latin America and Southeast Asia.
• Another issue that has plagued PYPL and its stock is the slowdown in growth for branded checkout volumes. Although growth accelerated to 8% in July, branded checkout volume moderated as the quarter progressed.
  • The company ended the quarter with branded checkout volume growth of 6% compared to 7.5% growth in the year-earlier period.
  • The silver lining, though, is that PYPL stated that trends have stabilized in Q4 and that it's tracking in line with the first half of 2023.

Overall, this wasn't an overly impressive performance for PYPL and the concerns over rising competition haven't dissipated. However, market participants are sensing that better days may be ahead under new CEO Alex Chriss. With the stock down by more than 70% since the beginning of 2022, that's a bet that many investors are willing to take right now.