Trading Strategies For PayPal Stock Heading Into Q2 Earnings

Zinger Key Points

Analysts expect the company to report EPS of $1.05 on revenues of $6.59 billion.
The stock has been hovering near the 200-day SMA and the reaction to the print will determine if PayPal can regain the level.
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PayPal Holdings, Inc PYPL gapped down slightly to start Wednesday's trading session and was falling an additional 2.5% intraday. The company is set to print its second-quarter financial results after the markets close.

Analysts expect the company to report EPS of $1.05 on revenues of $6.59 billion for the quarter ending June 30.

On July 25, BTIG analyst Lance Jessurun maintained a Buy rating on PayPal and raised a price target from $85 to $90. The new price target suggests 23% upside for the stock. Credit Suisse analyst Timothy Chiodo reiterated a Neutral rating on the stock and maintained a price target of $80. The price targets suggest about 10% upside for PayPal. Read More Here…

When PayPal printed its first-quarter earnings report on May 8, the stock dropped almost 13% the following day before continuing in its downtrend, which brought PayPal to a May 26 low of $58.95.

For that quarter, PayPal reported earnings per share of $1.17, beating a Street estimate of $1.10 per share. The company posted a top-line beat, reporting revenues of $7.04 billion, compared to the $6.98-billion consensus estimate.

From a technical perspective, PayPal looks mixed heading into the event, trading close to the 200-day simple moving average (SMA). Of course, holding a position in a stock over earnings can be akin to gambling, as stocks can rise following an earnings miss and fall after reporting a beat.

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The PayPal Chart: PayPal attempted to regain the 200-day SMA on Wednesday but rejected the area and fell slightly lower. The stock was working to print a doji candlestick, however, which could indicate the local bottom has occurred and PayPal will trade higher on Thursday.

If PayPal receives a bullish reaction to its earnings print and regains the 200-day SMA on Thursday, Wednesday's low-of-day will serve as a higher low, which will confirm the uptrend remains intact. The most recent confirmed higher low was formed on July 27 at $71.81 and the most recent higher high was printed at the $76.54 mark on Monday.
If PayPal tumbles following the event, the uptrend is likely to be negated with the formation of a lower low and a downtrend could be on the horizon. If PayPal continues to reject the 200-day SMA, a longer-term bearish cycle could be in the cards.
PayPal has resistance above at $77.36 and at $82.07 and support below at $73.27 and at $68.71.