PayPal Holds Strong Potential for Growth with Undervalued Stock and Positive Technical Indicators

Fundamental Analysis

PayPal Holdings, Inc. (Ticker: PYPL) is one of the oldest and most well-established firms in the financial technology (Fintech) sector. As of the market close on July 21, 2023, PayPal has a market capitalization of $82.18 billion and boasts an earnings per share (EPS) of $2.32. Despite prevailing macroeconomic headwinds, PayPal continues to operate in various payments-related segments, contributing to its overall revenue generation and profitability.

The stock recently closed at $72.99, reflecting a meager day-on-day change of -0.03 (-0.04%). It has shown a low and high price of $71.83 and $73.62, respectively in recent times. However, when comparing these prices with the year's extremes ($58.95 and $103.03), it is clear that PayPal has experienced significant volatility.

The company's 200-day moving average stands at $74.75, presently above the last closing price, suggesting a potential downturn in the longer-term trend. Nonetheless, the 50-day moving average of $65.89 is comfortably below the current market price, indicating the positive near-term trend.

The company's price multiples may seem high with a PE ratio of 31.75, pointing toward a certain level of overvaluation. But it's noteworthy to mention that high PE ratios are common in the tech industry, especially in a growth-oriented company like PayPal. Also, the discounted cash flow (DCF) estimate puts the stock value at $80.37, hinting at a possible undervaluation at the current price level.

Furthermore, the MACD (3-month) stands at 1.80, indicative of a bullish momentum in the recent past. Likewise, the RSI14 is 71, hinting at an overbought status in the very short term but a bullish signal nonetheless.

Technical Analysis

An upcoming earnings announcement on August 2, 2023, may further trigger significant volatility. If PayPal manages to beat earnings estimates, the stock is likely to see an uptick, bolstering investor confidence and attracting more market players. Relevant news regarding the company, such as favorable analyses tagging PayPal as a low-cost stock to buy and watch soar, and being named as one of the most undervalued fintech stocks to buy now, may also induce bullish sentiment. Investors must, however, remain cautious of news that could potentially disrupt the company's operations, such as possible changes due to Elon Musk's plans for 'X,' of which PayPal was a part during his CEO tenure.

Analysts hold mixed views with a low price target at $72, a median target at $123, and a high forecast of $290. The averaged analyst consensus target is $129.69, suggesting significant potential upside from the current price.

Prediction for the Next Trading Day and Week

On account of the above factors, PayPal's stock could very well see an uptick in the next trading day (July 24, 2023) and the following week, especially in light of its recognizable undervaluation and the upcoming earnings announcement. If investor sentiment remains positive and the market conditions favourable, the stock could potentially reach the DCF value of $80.37, which is an upside of around 10%. This prediction, however, remains subject to a vast array of factors, including broader market sentiment, macroeconomic indicators, and any new company-specific news.

Final Evaluation

Considering both the fundamental and technical analyses, PayPal Holdings (PYPL) is evaluated as a 'Buy'. Despite the observed volatility, the strong underlying fundamentals of the company and its position in the burgeoning fintech sector contribute significantly to this evaluation. The stock's upward momentum, reiterated by the MACD indicator and discounted cash flow valuation, further supports this conclusion. As always, investors are encouraged to do their due diligence and consider their individual risk appetite while making investment decisions.