Sign InSummary
PayPal's share price dropped 12% following a mixed Q2 earnings report that revealed unexpected losses in active accounts and negative free cash flow, raising concerns about the company's earnings performance and competitiveness in the fintech market, despite its strong position in the industry. Technical indicators show potential for upward price movement, but the stock is currently in a downtrend, and price predictions have a wide range, indicating high uncertainty. Overall, the stock would likely receive a Hold rating due to the combination of poor quarter results, oversold technical indications, and industry positioning, but investors should closely monitor the stock given the unpredictable nature of the fintech industry.
Fundamental Analysis
PayPal Holdings Inc. (ticker: PYPL) has recently posted a mixed second-quarter earnings report resulting in a 12% fall in its share price. The release highlighted an unexpected loss of active accounts for the second consecutive quarter and free cash flow turning negative. This follows a lower than expected growth in PayPal's branded checkout payments, which raised concerns about the firm's ability to withstand competitive pressure. Thus, recent news surrounding the company has raised valid concerns over its earnings performance and competitiveness in the fintech market.
Looking at the broader picture, PayPal operates in an industry that continues to garner a lot of interest. It remains one of the leading players in the fintech market. As numerous news articles have pointed out, fintech stocks like PayPal have been popular Wall Street picks because of their rapid growth in revenue and profit, especially during the peak periods of the pandemic when e-commerce volumes soared.
A detailed look at the stock fundamentals shows a price-to-earnings (PE) ratio of 27.05 as of August 4, 2023. This high PE multiple might be justified by the company's strong growth potential in the booming fintech industry. However, recent developments indicate that PYPL must confront several challenges in maintaining its revenue and subscriber growth.
Technical Analysis
A review of PayPal's technical indicators shows a few red flags that potential buyers should consider. The Relative Strength Index (RSI) stands at 26, which implies that the stock is currently in an oversold territory. This may indicate potential upward price movement if buyers see the current price as attractive.
However, the 50-day moving average (MA) at $67.81 and the 200-day MA at $74.09 are both above the current price of $62.75. This suggests that the stock is currently in a downtrend. A MACD of 2.60, a little above the zero line, might indicate a potential bullish signal.
Stock Price Prediction
The projected low price target for PYPL is $72, while the high price target is $290, providing a large spread which reflects high uncertainty in future predictions. The median and consensus price targets stand at $120 and $128.41, respectively.
The estimated price using discounted cash flow (DCF) analysis is $69.47, slightly higher than the current price.
Considering fundamental, technical and analyst predictions, it is expected that PYPL may experience some recovery in the next trading day, August 07, 2023. However, the larger prediction trend for the upcoming week seems moderately bearish due to the lingering concerns over the company's performance reported in the second quarter.
Final Evaluation
Considering both the fundamental and technical analyses, along with stock price predictions, PYPL would likely be a Hold rating at present. This is due to the combination of poor quarter results, yet strong industry positioning and oversold technical indications suggesting possible price recovery. However, investors should closely monitor PYPL given the high level of uncertainty reflected in the wide spread of price targets and the potential for rapid changes in the dynamic fintech industry.
