PayPal stock price forecast: buy the earnings dip or sell the rip?

By: Crispus Nyaga
Crispus Nyaga
Crispus is a Financial Analyst for Invezz covering the stock, cryptocurrency and forex markets. He’s an experienced analyst with… read more.
on Feb 2, 2022
  • The PayPal stock price declined sharply after reporting weak results.
  • The stock has now fallen by more than 53% from its all-time high.
  • We explain what to expect as PayPal transitions into a value stock.

The PayPal (NASDAQ: PYPL) stock price crashed on Tuesday after the company published strong results but weak guidance. The stock has crashed by over 17% in extended hours and is trading at about $145. That price is about 53% below its all-time high while its valuation has crashed to more than $185 billion.

Growth concerns

PayPal has been an embattled company in the past few months. Its stock has crashed by over 50% as investors remain concerned about its growth prospects.

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On Tuesday, the firm said that its total revenue for 2021 rose by about 18% to $25.4 billion. It also managed to handle transactions worth over 1.2$ trillion during the year. In the fourth quarter alone, the firm handled more than 5.3 billion transactions. Its volume rose to more than $340 billion, bringing the total revenue to more than $6.9 billion.

Its operating income was flat while its margin declined by 291 basis points during the quarter. Worse, the company’s customer additions in Q4 were lower than what it had guided before. It attributed this to the ongoing supply chain challenges that affected its e-commerce business. 

Second, the company changed its customer acquisition strategy and the significant number of accounts it disqualified. 

Worse for PayPal stock price, the company’s guidance was relatively lower than expected. It expects that its revenue growth will be between 15% and 17%. It also expects to add between 15 million and 20 million new customers this year. It ended last year with more than 426 million customers.

Therefore, the PayPal stock price has declined because of worries about growth. For a long time, PayPal was viewed as a fast-growth company. Now, with its growth slowing, some investors are now adding a lower multiple to the stock.

PayPal stock price forecast

The daily chart shows that the PayPal stock price rose in the past three straight days. However, the company’s share price crashed to about $145 in extended hours. It remains below the 25-day and 50-day exponential moving averages. It has also formed a descending channel that is shown in black.

Therefore, there is a likelihood that the PYPL stock price will continue falling as bears target the next key support at $125. In the long-term, however, the PYPL stock will likely bounce back as it becomes increasingly undervalued.

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