PayPal's stock (Nasdaq: PYPL) fell 13.17% in trading yesterday, despite what was a beat on both top and bottom lines in earnings. With the price now down at $77.72, the question as to whether this is a dip that should be bought or swerved comes to the fore.
From a technical perspective, Paypal's stock price hit this region back on 1st November, and in early October, finding support on each occasion. Alongside the technical's, one has come out in support of buying the dip, with others calling the sell-off overdone, or drastic.
Vocal support came from Monness Crespi Hardt & Co., who firmly advocate purchasing PayPal shares on weakness, accompanied by a $120 price target.
The firm noted that PayPal has exceeded expectations, delivering positive outcomes across revenue, EBITDA, EPS, and future guidance. Their assessment spotlights PayPal's transaction margin and EPS figures, both surpassing consensus. However, today’s response in the stock market reflects a possible elevation in the so-called “whisper number,” a widespread misunderstanding of the differing volume growth algorithms between Visa/Mastercard and consumer-facing entities like PayPal, and a perceived underestimation of the acceleration in PayPal’s strategic pruning of its Payment Service Providers (PSP) segment.
Addressing these misconceptions, Monness Crespi reaffirms buying PayPal stocks at the current lower price, given its prospects for recovery and growth.
BofA saw the decline as being an “outsized reaction”, unmoved in their price target of $103 and Buy rating. BTIG meanwhile saw the sell-off as a “bit drastic”, keeping their Neutral rating in tact.
PayPal Holdings, Incorporated finds its home in the credit services industry within the financial services sector. The company operates out of San Jose, California, and prides itself on a technology platform that enables digital payments worldwide. PayPal's expansive network connects merchants to consumers, facilitating seamless online and in-person transactions.
The company holds a market cap of $78.53 billion, bracketed by a 52-week low of $55.77 and a high of $93.64. In terms of revenue and earnings, the total revenue reported stands at $31.46 billion while the net income to common amounts to $4.43 billion.
When it comes to PayPal's shareholder structure, institutions hold a significant 74.96% stake. With 35 analysts offering opinions, the consensus remains clear, with an average “buy” recommendation. This is further supported by an average price target of $96.13, which, despite being below Monness Crespi's target, signals confidence in PayPal's potential upside.
PayPal's future undoubtedly holds challenges; however, the strength of its business model, combined with support of the analyst community may help. The indicative overnight move represents a 0.7% upside move for the stock leading into the pre-market, however with a 45% gain in 12 months leading into yesterday's decline, a pullback is not entirely unhealthy. Markets were clearly expecting more based on rumour numbers, time will tell how this one plays out.
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