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Should you buy or sell PayPal stock as analysts cut the price target on weak guidance?

on Nov 9, 2021
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  • PayPal shares on Tuesday plummeted more than 12% after announcing its most recent quarterly results.
  • The company posted solid FQ3 results but issued soft guidance for FQ4.
  • Analysts reacted to the weak guidance by lowering the PYPL stock price forecast.

On Tuesday, PayPal Holdings Inc. (NASDAQ:PYPL) shares plummeted more than 12% after announcing its most recent quarterly results. The company reported its fiscal third-quarter revenue and earnings Monday after markets closed, beating the consensus for analyst expectations.

However, the fintech giant issued cautious guidance for FQ4 revenue and earnings. As a result, analysts revised their PYPL price targets downward to factor in the soft guidance.

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PayPal posted FQ3 non-GAAP earnings per share of $1.11, beating the average for analyst estimates of $1.08, while its Q3 revenue of $6.18 billion missed the consensus Street forecast of $6.23, despite rising by 13% from the same quarter in 2020.

PayPal also issued FQ4 revenue guidance in the range of $6.85 billion to $6.95 billion, significantly below the Street forecast of $7.24 billion. Its EPS guidance of about $1.12 also fell short of the average analyst estimate of $1.27.

Is PayPal a good buy in November?

From an investment perspective, PayPal shares trade at a steep P/E ratio of 49.28 and a reasonable P/E of 34.32, making it an interesting choice for value investors. 

However, when you factor in its earnings growth prospects of about 71% this year and an average of 24% per year over the next five years, it becomes an exciting opportunity for long-term investors.

Source – TradingView

Technically, Apple shares seem to have recently plummeted to complete a downward breakout from a descending channel formation. As a result, the stock has fallen to the oversold conditions of the 14-day RSI, thus creating a perfect opportunity for a rebound.

Therefore, although the company issued cautious guidance for the holiday season quarter, the prospects of outperforming the guidance could be a catalyst for the rebound.

Investors could target profits at about $212.38, or higher at $222.81, while $192.49 and $181.15 are crucial support levels.

Is the pullback an opportunity to buy?

In summary, PayPal’s recent pullback comes ahead of a busy holiday season, making it an attractive opportunity to buy.

Therefore, with shares trading at reasonable valuation multiples, it could be time to add to your stake.