PayPal (NASDAQ: PYPL) stock price is at a crossroads ahead of the upcoming financial results. It has risen slightly by about 4.3% this year and dropped by over 10.7% in the past 12 months. Worse, the stock has crashed by over 41% in the past five years.
In contrast, the S&P 500 index has risen by over 72% in the past five years while the Nasdaq 100 is up by 122% in the same period. Long-term investors have lost a fortune since 2021. $10,000 invested in the stock in 2021 is now worth just $2,070.
PayPal earnings aheadPayPal stock price has crashed hard in the past few years as concerns about its growth slowed. Its total revenue stood at over $7.38 billion in over $17.7 billion in 2019 to over $29 billion in 2023.
While this is spectacular growth, there are signs that the company’s growth has stalled and the number of monthly active users has dropped. Its revenue grew by just 9% in the fourth quarter. Active users dropped to 426 million in Q4’23.
PayPal is also facing substantial challenges, especially in its unbranded division, which is made up of its Braintree assets. This division is finding competition from the likes of AfterPay, Stripe, and Adyen.
Looking ahead, the next important catalyst for the PayPal stock price will be its first quarter financial results scheduled for Tuesday. In its last financial statement, the firm estimated that its revenue growth would be about 6.5% while its non-GAAP EPS will be mid-single digits.
For the year, the company estimated that its free cash flow will be about $5 billion, equal to its planned share repurchases.
The average revenue estimate among investors is that the company made $7.02 billion in Q1, a small increase from $7.04 billion in the same quarter in 2023. Analysts expect that its revenue guidance for Q2 will be $7.28 billion.
For 2024 and 2025, analysts expect that its revenue will be $29.7 billion and $32 billion, respectively. These estimates show that the company is not growing at a faster pace like it did before.
Metrics show that the company is quite undervalued. It has a forward PE ratio of 17.5, which is lower than the five-year average of 50. The forward EV to EBITDA stands at about 9, lower than the five-year average of 23.
Most analysts covering the stock has a buy and strong buy rating. No analyst has a sell rating on the company. The average PayPal stock target is at $66.50, slightly higher than the current $64.10.
PayPal stock price forecast
My last two PayPal stock predictions have not worked out well. Earlier this month, I wrote that the company’s comeback would be epic. That has not happened as the stock has remained in a tight range since then.
The daily chart shows that the PYPL share price has bounced back from last year’s low of $50 to $64. It has moved above the 23.6% Fibonacci Retracement level. The stock has moved slightly above the 50-day Exponential Moving Average (EMA).
Most importantly, it has formed an inverse head and shoulders pattern and is now a few points below its neckline. Therefore, I still believe that the stock will bounce back in the coming weeks.
More upside will be confirmed if the stock moves above the crucial resistance at $67.94. If this happens, the next point to watch will be the 50% retracement point at $76.57, which is about 20% above the current level.
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