PayPal stock price has been a top laggard in the past few years, with any attempts to rebound facing substantial resistance. PYPL was trading at $61.25 on Thursday, down by 35% from its highest point this year. So, is PayPal a bargain or a value trap?
PayPal’s growth has stalled, and challenges are rising
PayPal, one of the top companies in the fintech industry, is struggling as competition in the sector grows and its revenue growth decelerates.
The company, which used to record double-digit growth rates a few years ago, is now experiencing single-digit growth metrics, a trend that will likely continue over time.
Its most recent results showed that PayPal made $8.4 billion in revenue, up by 7% from the same period last year. This revenue growth happened as the total payment volume rose by 8% to $458 billion.
Wall Street analysts believe that the era of a double-digit growth trajectory is over. The average estimate among analysts is that its revenue will be $8.84 billion in the fourth quarter. This growth will lead to an annual rate of $33 billion, up by 4.8% from last year.
Analysts also expect that the company’s revenue will rise by 6% in 2026 to $35.6 billion.
One major headwind facing PayPal is that stablecoins are becoming more popular globally. These coins are normally cheaper to transact with than PayPal’s platform.
For example, sending $10,000 overseas through PayPal can cost between $370 and $440. In contrast, a similar transaction using PayPal USD (PYUSD) would cost less than $10, depending on the network used. The same is true when using other stablecoins like USD Coin (USDC) and Tether (USDT).
PayPal valuation metrics are falling
The ongoing PayPal stock price crash has left behind a company that is highly undervalued. It has a forward price-to-earnings (P/E) ratio of 11.4, much lower than the five-year average of 25.
PayPal has a forward EV to EBITDA metric of 8.12, much higher than the five-year average of 17. Other valuation metrics show a similar situation.
The company, which is now positioned as a value stock, is working to boost its stock through financial engineering. It has returned $5.7 billion to shareholders through share repurchases in the last 12 months and plans to accelerate the process. Its share repurchases have helped it boost its earnings per share
And in a significant step, the company announced that it would start paying a dividend, paying $0.14 per share. It will now start paying a dividend each quarter, a move that will continue to reward its shareholders.
The main challenge for PayPal is that its turnaround is taking too long to generate substantial growth metrics.
PayPal stock price technical analysis
PYPL stock price chart | Source: TradingView
The daily timeframe chart shows that the PYPL stock price has plunged in the past few months, moving from a high of $93.43 in December last year to the current $62.
It has plunged below all moving averages, a sign that bears are in control for now. The stock has also moved below the Supertrend indicator, while the Relative Strength Index (RSI) and the MACD indicators have continued moving downwards.
Therefore, the most likely scenario is where the PayPal stock price continues falling, with the next key support level to watch being the psychological level at $50.
On the flip side, a move above the important resistance level at 64.50 will invalidate the bearish outlook and point to more upside.
The post PayPal stock price forecast: Is this fintech giant a buy? appeared first on Invezz