Sign InPayPal (PYPL) Struggles Near 52-Week Lows as Earnings Impact Sentiment
Summary
PayPal Holdings, Inc. has seen a slight increase in its stock price recently, but it is still close to its 52-week lows and has a negative outlook based on recent performance, although the introduction of a new stablecoin and the potential for long-term growth in digital banking services present some positive opportunities.
Fundamental Analysis
PayPal Holdings, Inc. (ticker: PYPL) has been struggling in recent days, with its last closed trading day on August 10, 2023, at $62.79, which indicates a small increase of $0.77 or 1.24% from the previous trading session. The high and low for the day were $63.05 and $62.07, respectively. However, the current price is significantly lower compared to the 52-week high of $103.03, and only slightly above the 52-week low of $58.95. This places PYPL close to its 52-week lows, signifying a negative outlook based on recent performance.
The market capitalization of PYPL is around $70.06 billion, which designates it a significant player in the market. The traded volume of 13.01 million was below the average volume of 18.24 million, indicating lesser investor interest in the stock on the closing day. PayPal's EPS stands at 2.32 with a P/E ratio of 27.06. This ratio is marginally higher than the sector average, depicting a relatively expensive valuation.
The news impacting PYPL's performance mainly revolves around their quarterly earnings and newly announced product - a U.S. dollar-backed stablecoin. The market has responded negatively to PayPal's Q2 2023 earnings, which has dragged the stock closer to its 52-week lows. However, the projection of a solid long-term growth, driven by the adoption of digital banking methods, and the new stablecoin, signifies a positive outlook.
Technical Analysis
The Relative Strength Index (RSI) for PYPL is currently 30. This suggests that the stock is nearing oversold territory and could be primed for a reversal. However, the stock's Moving Average Convergence Divergence (MACD) over the past three months is 1.01, indicating bullish momentum.
PYPL's 50-day Moving Average (MA) is $67.99, and the 200-day MA is $73.65. These figures illustrate a downtrend, as the current price of $62.79 is below both MAs. This suggests a bearish sentiment within the marketplace, and it's quite possible the share price may continue to slide unless an upward turn in the overall sentiment occurs.
Additionally, PYPL shows a decent swing trading range with an Average True Range (ATR) of 3.54, hence offering opportunities for intraday or short-term trades.
Price Prediction
Given the technical and fundamental analysis, it can be expected that the price will hover around the $62.75 support level for the next trading day. If it breaks the support level, the stock may continue to slide down. In contrast, if it reverts back, the first resistance level to break would be $64.18.
Discounted cash flow (DCF) value of PYPL is approximately $69.51, which is higher than the current trading price, indicating the shares may be currently undervalued. Analysts' consensus target stands at $128.41, suggesting a significantly higher long-term value.
Final Evaluation
Even though the current price is close to a 52-week low, and the recent market reaction to the Q2 2023 earnings was negative, the long-term growth potential for PayPal is notable. With the rise in digital banking services and the introduction of a U.S. dollar-backed stablecoin, PayPal shows promising growth opportunities. Considering these factors and given that the shares may be currently undervalued as per the DCF valuation, the stock is rated as a Hold.
Nonetheless, the investor should keep a close eye on the support level and be wary of any further negative news or market reactions, which may pose continual risks to stock performances.
