PayPal stock price analysis: why is PYPL falling apart?

PayPal (NASDAQ: PYPL) stock price is falling apart as attempts to recover find substantial resistance. It has plunged to a low of $58.25, its lowest point since March 7th. It is also nearing a bear market as it collapsed by almost 20% from its highest point this year. 

Concerns about PayPal continue

PayPal’s share price has crashed hard after peaking during the pandemic. In this period, the stock has fallen from over $300 to below $60 today. Along the way, its market cap has dropped from over $300 billion to about $60 billion.

PayPal’s performance is mostly because the company is no longer the growth machine it was a few years ago. The number of users in its ecosystem has continued dropping and stood at about 427 million in the last quarter.

The most recent results revealed that PayPal’s double-digit growth period has ended. Its revenue rose by 9% to $7.7 billion as the total payment volume rose to $403 billion. Payment transactions increased by 11% to $6.5 billion.

Analysts expect that PayPal’s growth is expected to continue slowing in the foreseeable future. The average estimate is that its revenue for the year will be $32 billion followed by over $34 billion in 2025. 

PayPal’s biggest challenge is that competition in its unbranded business is rising. This competition is coming from the likes of Klarna, Affirm, AfterPay, Google Pay, Apple Pay, and others.

Still, PayPal has now become a value company, which explains why its valuation multiples have tanked. PayPal has a price-to-earnings ratio of about 14, which is lower than the S&P 500 index multiple of 21.

While its growth has slowed, PayPal still has over 427 million users and a strong balance sheet with over $17.7 billion in cash. It is also returning substantial sums of money to shareholders, with these returns totaling about $1.5 billion in the last quarter. It has also repurchased 81 million shares in the trailing twelve months.

Analysts have a positive outlook for the company, with the average estimate being $76.57, up from the current $58.26. Some of the Wall Street shops bullish on PayPal are Citigroup, Mizuho, Wells Fargo, and New Street Research.

PayPal stock price analysis

PYPL chart by TradingView

The daily chart reveals that the PYPL share price has been under pressure for a long time. It formed a rising wedge chart pattern since August last year. The rising wedge is one of the most bearish signs in the market, which explains why it has moved below its lower side. 

PayPal has also done a break and retest pattern by retesting the lower side of this wedge pattern. A break and retest is one of the bearish signs in the market.

The stock has also dropped below the crucial support at $60.95, its lowest swing on May 29th. Also, the MACD indicator and the Relative Strength Index have also drifted downwards. 

Therefore, the stock will likely continue falling as sellers target the key support at $56, its lowest swing in February. If this happens, the next point to watch will be at $50, its lowest level in 2023.