Sign InSummary
PayPal Holdings, Inc. (PYPL) is a giant in the digital payment processing space with a reliable earnings track record and reasonable valuation, and while its recent performance has been underwhelming, it may present an attractive entry point for potential investors based on the consensus buy rating, a target price of $128.41, and the oversold condition indicated by the RSI; however, investors should consider the bearish technical trend and exercise caution.
Fundamental Analysis
PayPal Holdings, Inc. (ticker: PYPL) is a giant in the digital payment processing space with a market capitalization of $68.66 billion. It recorded earnings per share (EPS) of $2.32, and a price-to-earnings (PE) ratio of 26.53, indicating a reliable earnings track record and reasonable valuation given the industry average. However, the stock's recent performance has been underwhelming, with a closing price of $61.54 on August 11, 2023, which represents a decrease of $1.25 (-1.99%).
Despite this, the recent dip in price might be seen as an attractive entry point for potential investors. The consensus amongst analysts recognizes PYPL as a "buy" with 22 analysts recommending a "buy" against only 9 recommending a "hold" and none suggesting a "sell". The consensus target price for PYPL is $128.41, with a high target of $290 and a low target of $72.
Recent news surrounding the company has been a mix of positive and negative. On one hand, PayPal's launch of a new USD-denominated stablecoin (PYUSD) has generated excitement and possibilities for new revenue streams. On the other hand, some red flags have been raised regarding PayPal's recent performance, particularly in relation to Q2 2023 earnings results. Despite this, the market is responding positively to the firm's progress, and a news mentioning potential revenue outperformance is a good sign.
Technical Analysis
Technically, PayPal's 50-day moving average indicates a midterm bearish trend, with the stock trading below its moving average of $67.99. It is also trading below its long-term 200-day moving average of $73.43, exhibiting a strong bearish trend. The MACD (3-month) at 0.41 also suggests the stock might have lost momentum in the recent past.
The Relative Strength Index (RSI) of 26 illustrates the stock has been oversold and may be due for a price recovery, subject to market conditions. However, the stock's low price of $61.47 and high price of $62.5, along with a resistance level at $61.69, suggests limited upper price movement.
Stock Prediction
For the next trading day, August 14, 2023, PayPal may recover slightly from the oversold condition, given the RSI of 26. A potential upside could be till the resistance level of $61.69 if the market conditions favor an upswing.
For the upcoming week, considering the MACD and moving averages, we could expect the continuation of the bearish trend. However, if the company's stablecoin PYUSD brings positive news or sentiment to the market, this trend could possibly reverse.
Final Evaluation
Considering the combination of PayPal's strong position in the payment processing industry, recent launch of PYUSD, and consensus of a "Buy" rating from analysts, along with the currently oversold position revealed by the RSI, the evaluation would assign a "Buy" rating to PYPL stock. While the technical trend paints a bearish picture, the favorable factors suggest potential upside in the medium to long term. However, investors should exercise caution and also consider their risk tolerance and individual investment strategy.
