Is PayPal a buy or sell in January?

Is PayPal a buy or sell in January?
Written by:
Stanko Iliev
January 13, 2021
  • PayPal introduced a new Cash a Check feature in its Venmo app
  • Evercore lifted the price target on PayPal to $312 from $240
  • As long the price is above $200, Paypal shares remain in the "buy" zone

PayPal (NASDAQ: PYPL) continues to expand its business, and shares of this company are trading near an all-time high. Digital payments remain a strong area of growth, and the analyst company Evercore lifted the price target on PayPal to $312 from $240.

Fundamental analysis: Digital payments remain a strong area of growth

PayPal shares advanced more than 100% in 2020, and the stock price continues to rise. PayPal continues to expand its business, and according to analysts, this company has a bullish outlook.

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PayPal’s new crypto service allows users to buy goods and services with crypto, and the company also introduced a new Cash a Check feature in its Venmo app for select customers. Venmo customers can print cash, payroll, and government checks directly from the Venmo app.

PayPal reported Q3 results at the beginning of November; total revenue has increased by 24.7% Y/Y to $5.46B while Q3 GAAP EPS was $0.86 (beats by $0.28). Total revenue has increased above the expectations (+$50M), and the company raised its FY 2020 outlook.

“PayPal’s third quarter was one of the strongest in our history. Our growth reinforces the essential role we play in our customers’ daily lives during this pandemic. As we advance, we are investing in creating the most compelling and expansive digital wallet that embraces all forms of digital currencies and payments, and operates seamlessly in both the physical and online worlds,” said PayPal CEO Dan Schulman.

According to the latest news, PayPal has invested in Taxbit, a Utah company that helps crypto users figure out taxes on their holdings. The positive information is that the analyst company Evercore lifted the price target on PayPal to $312 from $240.

Digital payments remain a substantial area of growth, and even as the end of the coronavirus comes into sight, more consumers are expected to retain this habit. PayPal shares are trading near an all-time high, and as long the price is above $200, this stock is in the “buy” zone.

Despite this, my opinion is that Paypal is currently overvalued, and the main drivers of PayPal’s recent capitalization growth are external. With a $278B market capitalization, this stock remains expensive and represents an opportunity only for short-term traders.

Technical analysis: As long the price is above $200, this stock is in the “buy” zone

When we look at the chart below ( one year period), we can see that this stock price has advanced from $82 to $247. As long the price is above $200 support, this stock remains in the “buy” zone, and there is no indication of the trend reversal.

Data source: tradingview.com

On this chart, I marked significant resistance and support levels. The critical support levels are $220 and $200, $250, $260, and $280 represent the resistance levels. If the price jumps above $250, it would be a signal to buy shares, and the next target could be around $260.

On the other side, if the price falls below $200, it would be a firm “sell” signal, and we have the open way to $180.

Summary

PayPal continues to expand its business, and the last quarterly report was one of the strongest in its history. Digital payments remain a strong area of growth, and the analyst company Evercore lifted the price target on PayPal to $312 from $240. My opinion is that Paypal is currently overvalued, but as long the price is above $200 support this stock remains in the “buy” zone.