Pair Trade: PayPal Vs. Block

We are presenting a pair trade idea to benefit from the upside potential of PayPal relative to its peer Block.PayPal is growing faster and is not impacted by the cryptocurrency crash and its fallout.PayPal has way better earnings quality and trades at an extraordinary discount compared to how Block is valued.Article ThesisIn this article, I'll lay out a pair trade idea that would combine a long position in PayPal Holdings, Inc. (PYPL) with a short position in Block, Inc. (SQ). My thinking is based on a way more reasonable valuation for PayPal, better earnings quality for PayPal, better growth momentum for PayPal, and Block's exposure to cryptocurrencies that should be a major headwind in the current crypto bear market, whereas PayPal is less exposed to cryptocurrencies.Reason 1 For PayPal Outperformance: Growth Momentum And Cryptocurrency ExposurePayPal has seen its shares drop significantly over the last year, which also holds true for Block. In PayPal's case, the share price drop was based on a too-high valuation one year ago, combined with the realization that its growth will not be maintained at an ultra-high level forever. Nevertheless, PayPal continues to grow, and at a faster rate than Block:Data by YChartsPayPal has delivered significantly better growth during the most recent quarter, with a 7% increase year over year, while Block's revenue dropped more than 20%. For the current quarter, a big difference in favor of Pa...