PayPal Touches 5-Year Low – Time for Stock Accumulation?

#PayPal’s stock price has eroded around -76% since forming the ATH peak (309.47) in July 2021 until today. The bearish trend of 2021 was extended in 2022 by erasing all the gains that had been accumulated since 2018. The current bearish trend is due to various factors, including its declining revenue. In the previous quarter, the financial report showed that the company’s revenue fell by -18% compared to the same period last year.

Indeed, stock prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare earnings per share (EPS) to the share price. PayPal unfortunately reported a 53% drop in EPS last year and investors have since seemed hesitant to keep their faith in the stock, but now that the decline has reached the $74.00 mark it will certainly provide a different allure. Some institutional investors and hedge funds have recently changed their holdings of the company.

Despite the company’s poor performance, most investors are likely still optimistic about PayPal. The consensus among 28 Wall Street analysts based on TipRanks, offered a 12-month price target for PayPal Holdings in the last 3 months. The average price target is $107.64 with a high estimate of $160.00 and a low estimate of $75.00. The average price target represents a 45.03% change from the last price of $74.22. This shows that many are still optimistic about the company’s future performance.

One of the main factors that may be driving the bullish sentiment among analysts is PayPal’s strong position in the digital payments market. The company has an established network of users and merchants and continues to invest in new technologies and partnerships to expand its reach. This strong market position, combined with the growing popularity of online and mobile payments, leads many analysts to predict that PayPal will continue to be a leader in the industry.

Technical Overview

#PayPal in Wednesday’s trading (07/12) gained over +3%, after rebounding from the daily low of $71.01 in a daily bullish engulfing candle formation. Support is seen at $67.55, recorded on June 30, while resistance is at $92.50, $103.01 and $122.78. The bearish pressure does not appear to be over yet, with candle formations still below the 26-day and 52-day exponential average prices, but as prices get closer to support, it tends to put psychological pressure on sellers.  This can be seen from the wave formation that is forming a descending triangle pattern in the bias of RSI and MACD divergence.

#PayPal, Daily

Important to note in the descending triangle pattern is the breakout on the upside and downside. If the price breaks the descending sloping line, it should test the $92.50 resistance, where the breakdown of this structure could indicate the beginning of a change in market interest in the value of this stock. The next challenge is the 200-day EMA which is at the resistance range of $103.01. While trend changes don’t happen in a short period of time, the consolidation that has lasted for the last 7 months may affect the market’s perception of whether #PayPal is in a stock accumulation phase.

The $67.55 support will certainly be a crucial limit for investors, as it is balanced on the 2018 low price recorded in the $70.00 range.

Ady Phangestu

Market Analyst – HF Educational Office – Indonesia

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