PayPal logo on the glass against blurred business center. Editorial 3D
Fintech stocks have become some of the worst performers on Wall Street as investors worry about their growth prospects. Indeed, it is a bit difficult to see a fintech stock that has had positive returns. For example, the PayPal share price has collapsed by over 60% from its all-time high, shedding over $200 billion in value. The same is true with other companies like Block, Affirm, Remitly, SoFi, and Robinhood.
There are two main reasons why the PayPal stock price has crashed hard in the past few months. First, there are concerns about growth in the industry. The company benefited substantially during the pandemic as most people stayed at home. With the pandemic ending, investors are fearful that demand for these services will be sharply lower.
In other words, there is an ongoing rotation from lockdown to reopening stocks. This also explains why companies like Zoom Video, Teladoc, and Shopify have retreated by over 50%. Also, the Ark Innovation Fund, which more than doubled has, collapsed in this period.
Second, the PayPal share price has performed because of what people see as desperation from the management side. It was widely reported that the company was considering making a bid for Pinterest, a social media company. The price tag was about $40 billion. At the time, investors thought the company was acting desperate and overpaying for the firm. Today, Pinterest is worth $17 billion,
Still, PayPal seems like a good investment. First, the collapse of the PYPL stock has caused its stock to become cheap. It is trading at a PE ratio of just 24, which is the lowest it has been in months. Second, the company has over 426 million users globally that it can monetize. Further, it creates a super app that will let people do most of their financial stuff in its platform.
Most importantly, PayPal is a cash-generating machine that will keep doing well even after the pandemic. This explains why most analysts have a bullish view, with the stock’s average target being at $180, which is much higher than the current $116.
PYPL share price formed a small double-bottom pattern this year. In price action analysis, this pattern is usually a bullish sign. It has moved slightly above its upper chin at about $113. It has also formed a small break and retest pattern.
At the same time, the Smart Money Index has formed a small bullish crossover pattern while the Smart Volume remains a bit low. Therefore, there is a likelihood that the PayPal stock price will keep rising as bulls target the key resistance at $130. This view will be invalid if it moves below $110.
This post was last modified on Mar 25, 2022, 08:44 GMT 08:44