PayPal's Phoenix Moment? What's Fueling The Stock Surge Ahead Of Q4 Results

PayPal Holdings, Inc. PYPL shares, consolidating under $100 since April 2022, gained volume momentum in mid-January, sparking discussions on social media platforms and chatrooms, fueling speculation about its emergence as a new meme stock.

Stock Trajectory:

PayPal’s stock, regarded as a “COVID-19 play” during the pandemic, reached an intra-day record of $310.16 on July 26, 2021, completing a double top formation. 

Following this, the stock underwent a secular downtrend until June 2022, influenced by economic reopening, rising interest rates, and inflation concerns impacting fundamentals.

The release of 2023 first- and second-quarter results in early May and August led to significant downward gaps. After hitting a low of slightly over $51 in late October 2023, the stock rose until last Monday.

Chart Courtesy of Benzinga

Recent Developments:

Notably, trading volume surged in mid-January, consistently surpassing the three-month average volume of 17.95 million. On Jan. 22, with the stock peaking at $68.21, approximately 44 million shares exchanged hands. 

Despite paring some gains since then, the stock closed Friday’s session up 1.76% at $61.78, according to Benzinga Pro data.

The recent weakness is attributed to a lukewarm response to the “First Look” keynote by the new CEO, Alex Chriss, hosted on YouTube. The event aimed to showcase new product innovations and AI enhancements at PayPal and its Venmo mobile payments subsidiary.

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Analyst Outlook:

KeyBanc Capital Markets expressed negativity about PayPal’s wallet share based on its fintech survey, citing competition from other digital wallets like Apple Pay. 

Morgan Stanley’s James Faucette voiced concerns over a lack of significant product announcements in the “First Look” presentation, impacting sentiment. “Investors … hoping for significant product announcements or integration updates were likely disappointed,” he said.

The analyst also expressed concerns over a lack of updates on measures to drive Venmo checkout usage and acceptance. “Venmo is PayPal’s key strategic asset to growing and retaining share with Gen Z/Y, particularly by widening its acceptance and increasing availability of credit on the app,” he said.

PayPal offers services such as online checkout, peer-to-peer transfer, credit card, debit card, “buy-now, pay-later,” and crypto trading, among other things.

Leadership Changes:

Undergoing a complete C-suite overhaul in 2023, PayPal appointed Chriss as CEO, Jamie Miller as CFO, and Archie Deskus as CTO. Suzan Kereere assumed the role of President, Global Markets, effective Jan. 1, 2024.

Retail Sentiment & Technicals:

Despite recent challenges, PayPal remains a focus among retail traders, with optimism expressed for potential growth in 2024. 

Technically, the stock faces immediate resistance at its 200-day moving average of $63.49. Overcoming this, it may target the $72 area, eventually facing resistance near $92. Support levels include the 50-day moving average of $60.11 and around $55.

The 14-day relative-strength index indicates neutral territory, suggesting a balanced market sentiment.

Upcoming Earnings & Price Targets:

PayPal is set to release its fourth-quarter results on Feb. 7, with analysts expecting earnings per share of $1.36 on revenue of $7.87 billion. The average analysts’ 12-month price target is $72.07, according to TipRanks, implying a 17% upside potential from current levels.

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