Key points
- After facing challenges in 2022 and 2023, PayPal shares have remained stable, rising 7.7% year to date and sitting above its 200-day moving average, signaling a potential shift in momentum.
- PayPal stock displays an inverted head and shoulders pattern, potentially signaling an uptrend, especially if it breaks out of the $68 to $70 neckline.
- Analysts remain divided on PayPal’s prospects, with a consensus hold rating and a price target steadily decreasing compared to previous months.
- 5 stocks we prefer to PayPal
In the wake of the tumultuous COVID-19 pandemic, PayPal NASDAQ:PYPL has emerged as an exceptional player, riding the wave of digital transformation in payments. Throughout 2020, PayPal not only weathered the storm, but thrived amid the chaos, seeing surges in several key metrics. Total payment volume (TPV), revenue and active accounts have soared, pushing the company’s stock price to notable heights.
Between March 2020 and February 2021, PYPL stock increased more than 250%, reflecting investor confidence in its resilience and growth potential.
However, the economic landscape proved dynamic and challenging, as PayPal faced challenges in 2022 and 2023. Inflationary pressures and rising interest rates dampened the once meteoric growth trajectory, leading to higher earnings modest and subdued performance. Despite these challenges, PYPL stock has held its ground, rising approximately 7.7% year to date, in line with the broader market.
Interestingly, PayPal stock is now hovering above the flattening 200-day simple moving average (SMA), signaling a potential change in momentum and trend. Furthermore, with an attractive forward price-to-earnings (P/E) ratio of 11.68, a recent earnings beat, and expected earnings growth of 12.21% for the full year, the question arises: is now the Good time to consider PayPal for investment, given the potential for further continuation of the rally?
We examine the recent developments shaping the narrative around PayPal, examining analyst ratings and analyzing its chart for potential breakout opportunities as investors evaluate whether current conditions present an advantageous entry point.
Analysts remain mixed despite the recent earnings beat
PayPal, one of the world’s largest and oldest fintech companies, announced its latest earnings on February 7. The company beat expectations, reporting $1.48 earnings per share for the quarter, beating the consensus estimate of $0.12. Additionally, PayPal posted revenue of $8.03 billion, surpassing the consensus estimate of $7.88 billion. This marked a revenue increase of 8.7% compared to the same quarter last year. Over the last year, PayPal generated earnings per share of $3.84 (diluted). The company has long-term annual growth estimates of 19.8% for EPS growth over the next five years.
Despite the company’s recent earnings surge and successful navigation through recent challenges, analysts remain mixed on the stock. Based on thirty-five analyst ratings, the stock has a Hold rating, which aligns with the consensus rating for the S&P 500 and other financial services companies.
Its consensus price target, which has steadily declined over the previous months and years, is currently $70.63, predicting only a potential upside of 6.78%. Most recently, on March 21, Royal Bank of Canada reiterated its rating on PYPL at Outperform, with a price target of $74.
Institutions continue to buy PayPal shares
Over the past twelve months, PayPal has seen significant institutional activity, with total inflows of $24.27 billion versus outflows of $10.52 billion. Institutional investors hold 68.42% of the shares, with Vanguard Group as the largest holder, owning 8.4% of the company as of March 11. Insider trading activity was relatively subdued during this period, with only four transactions taking place, all sales. Domestic sales totaled $4.94 million, with no reported domestic purchases.
The fund appears to be ready for PayPal stock
On a broader time scale, PayPal stock displays an inverted head and shoulders pattern, with the previous year’s November low around $50 serving as both a head and bottom. Above all, the stock regained and stabilized its significant simple moving averages (SMA), suggesting a potential change in trend and sentiment. If the stock breaks out of the neckline of the inverted head and shoulders pattern, approximately in the $68 to $70 range, it will likely confirm the momentum shift into the higher time frame.
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