Earnings season is in full swing, so investors are getting much-needed updates on their holdings. One particular business just brought in a new CEO last year. Shareholders have probably been wondering how progress has been.

The company I'm talking about is PayPal (PYPL -0.98%). It recently reported its first-quarter financial results.

Lately, it's been getting attention on Wall Street for the wrong reasons. This fintech stock has been a disappointment, as its shares are currently 78% cheaper than their all-time high. But is it a good long-term investment option?

Encouraging signs

I thought PayPal's latest quarterly update gave shareholders reasons to be optimistic about the state of the business. Alex Chriss, the CEO who is aiming to boost growth and profitability, is doing a good job so far.

During the quarter, PayPal reported a 9% year-over-year revenue increase, the fastest growth rate since Q3 2022. This was driven by an impressive 14% gain in total payment volume, which totaled a whopping $404 billion in the three months. This massive sum clearly indicates that PayPal remains a dominant force in the digital payments space.

One of Chriss' objectives from the start has been to drive greater efficiencies across the organization. "We are instilling a rigorous cost benefit discipline throughout the company and leaving no stone unturned when it comes to reducing unproductive costs," he said on the Q1 2024 earnings call. There's already been progress on this front: PayPal's operating margin expanded from 14.2% in the year-ago quarter to 15.2% today.

There's also a renewed focus on prioritizing customers' needs and boosting innovation and product development. Investors will likely cheer at PayPal's attempt to leverage artificial intelligence throughout its various payment and financial services products, particularly when it comes to fraud detection, something merchants really value.

Zoom out

Despite the positive results, the market hasn't been kind to PayPal shareholders, as evidenced by a stock price that has dropped 11% in the past 12 months. There are some possible reasons for this.

For starters, PayPal's user base has flatlined in the past couple of years. As of March 31, 2024, the business counted 427 million active customers, which is down 2 million compared to Q1 2022. The positive spin on this, though, is that these users are more engaged, initiating more transactions.

However, the lack of account growth points to intensifying competition. We can't ignore the rise of popular digital wallet providers like Apple Pay and Alphabet's Google Pay, as well as compelling merchant-focused payment businesses like Adyen and Stripe. These well-resourced rivals will only make things more difficult for PayPal to achieve healthy growth in the years ahead.

Too hard to ignore

Nonetheless, I still believe PayPal looks like a smart buying opportunity today. Competition is fierce, but this business has been dominating the fintech industry for more than two decades. It has built up a trusted brand known for simplicity and security, factors that matter when people and businesses are dealing with money.

PayPal remains extremely profitable. It generated $1.8 billion of free cash flow in Q1, with plans to produce $5 billion for the full year. Management plans to use the cash to aggressively repurchase shares.

And right now, the stock is cheap. Because they have gotten so crushed, shares trade at a forward price-to-earnings ratio of 16.2. That demonstrates the heightened pessimism the market has when viewing this business.

But as PayPal continues to grow its revenue and net income -- which it's doing right now in an uncertain economic environment -- the returns should follow. So investors should consider adding PayPal shares to their portfolios. I think it's a good long-term option.