PayPal (PYPL) stock forecast: Can it reverse downtrend?
Softening e-commerce and macroeconomic headwinds could cloud future of fintech leader
As 2022 draws to a close, the stock price of payment giant PayPal (PYPL) has yet to reverse its downtrend. The end of Covid-19 restrictions in most countries has seen less online shopping and a reduction in the need for digital payment.
Soaring inflation – which briefly hit the highest level in four decades in the US – has forced consumers to cut spending.
The ongoing Russia-Ukraine war has raised the prices for food and energy, exacerbated inflation and prompted investors to dump growth stocks, especially in technology companies.
The headwinds have continued to pressure the PYPL stock price, erasing a 116.5% gain in 2020 when the pandemic hit. As a result, it has dropped more than 53% year to date (YTD) and declined nearly 64.5% year over year (YoY), lagging the US Tech 100 (US100), which has fallen 30.4% this year and 26.96% YoY.
At the time of writing (27 October), PayPal’s stock dropped 0.77% to $88.55 at close on 26 October. However, it recorded a weekly gain of 4.97%, outperforming the Nasdaq, which rose by 2.92% in one week, according to TradingView.
This article examines whether other factors have affected PYPL’s ongoing downtrend, the latest stock news and PayPal’s share price forecast from analysts.
PayPal (PYPL) technical analysis
A PayPal stock analysis by Trading View showed PayPal’s closing price on 26 October was nearly 71.3% below its all-time high closing price of $308.53 a share, achieved on 23 July 2021.
PYPL fell nearly 25% in a single day for the first time this year on 2 February, after the company announced financial results for the fourth quarter of the fiscal year 2021. The downtrend has continued since then.
The stock had managed to book its biggest gain in a single day this year, closing 11.48% higher on 28 April, a day after it reported that revenue in the first quarter of 2022 was above analysts’ expectations. The gain was short-lived and PYPL resumed its decline.
PayPal stock outlook: Rate hikes and increased competition
Inflation is likely to remain bad news for the Californian-based fintech leader. The US annual inflation rate, as indicated by the Consumer Price Index (CPI), rose by 8.2% in September below the figure of 9.1% in June. The most recent data indicated that inflation remains elevated, which is unlikely to change the US Federal Reserve’s (Fed) already aggresive stance.
This year, the Fed has raised borrowing costs five times since March with a total increase of 300bps, taking the Federal Fund rate target to 3%–3.25% in September.
Brett Horn, Morningstar’s senior equity analyst, in a note issued on 27 July, said that PayPal is likely to face headwinds from e-commerce and electronic payments which had turbocharged the company’s growth during the Covid-19 pandemic.
Horn also highlighted rising competition from rivals that try to replicate Paypal’s business model.
PayPal stock prediction: Analyst sentiment
Morningstar maintains its fair value estimate for PYPL’s stock price at $135 per share.
“The payment-processing industry is evolving, and it is possible that new competition and future disruption could significantly reduce the profitability PayPal can generate or cut it out altogether,” said Horn.
“As the company’s revenue is directly tied to revenue at its merchant customers, PayPal is sensitive to macroeconomic conditions. PayPal’s international operations present currency and execution risk. Some governments have shown a preference for local payment processors, which could freeze PayPal out of certain markets.”
Horn added that the company’s peer-to-peer or P2P, Venmo, is unlikely to become a major driver any time soon, despite generating $900m in revenue in 2021, or 4% of PayPal’s revenue. In addition, its future is difficult to predict.
As of 27 October, 43 analysts tracked by MarketBeat put a ‘moderate buy’ call for PYPL. They offered an average PayPal stock price target for the next 12 months of $132.19, representing a potential increase of 49.28% from the closing price of $88.55 on 26 October. The high price target was $270 and the low prices estimate was $90.
A ‘strong buy’ was the consensus recommendation of 29 Wall Street analysts polled by TipRanks as of 27 October – 23 analysts rated the stock a ‘buy’ and six a ‘hold’. The average 12-month price forecast for PayPal was $119.63, implying a potential upside of 35.10% from the last price of $88.55 on 27 October. Analysts offered a high forecast of $160 and a low of $90.
Trading Economics expected PayPal to trade at $81.29 by the end of the fourth quarter and at $73.82 in one year. The economic data provider based its PayPal’s stock predictions on projections made from global macro models and analysts’ expectations.
The consensus recommendation of 50 analysts tracked by MarketWatch was ‘overweight’, with 30 analysts rating the stock a ‘buy’, eight ‘overweight’ and 12 ‘hold’. The analysts set the PYPL 12-month price target at an average of $119.19, with a high estimate of $160 and a low of $89.
PayPal stock forecast 2022-2025, 2030
Analysts typically do not provide long-term PayPal’s share price forecasts, but algorithm-based price prediction services such as Wallet Investor, give PayPal’s future stock price using PYPL’s historical prices.
Algorithm forecasting services have mixed views on PYPL stock. Wallet Investor was bearish on PayPal’s future stock price, saying: “PayPal Holdings Inc stock is a bad long-term (one year) investment.” As of 27 October, Wallet Investor in its PayPal’s stock forecast for 2022 expected it could drop to $48.445 in December 2022.
On the other hand, machine-learning prediction service Gov Capital was optimistic the stock could reverse its downtrend. In its PayPal stock predictions it estimated the share value could rise to $94.319 on 31 December 2022, climbing to $805.016 on 31 December 2025 and $1,390.629 on 30 October 2027.
The two forecasting services did not provide PYPL’s stock forecast for 2030.
When looking at PYPL stock forecasts, it’s important to remember that analysts’ forecasts and price targets can be wrong and should not be considered a recommendation to invest in the company.
It’s vital to do your own research and consider the latest market trends and PayPal stock news. Your decision to trade should depend on your attitude to risk, your expertise in the market, the spread of your investment portfolio and how comfortable you feel about losing money. And never invest more than you can afford to lose.
Is PYPL a buy now?
Analysts tracked by stock analysis companies mentioned in this article recommended a ‘buy’ for PYPL’s stock, as of 27 October. However, keep in mind that there are many factors that influence analysts when they offer ratings for a company, including the company’s performance and macroeconomic factors. As a result, ratings can change over time, depending on those factors.
Will PayPal stock go up?
Analysts and algorithm-based forecasting service Gov Capital expected the stock to go up within a year in their PayPal’s share price forecast. On the other hand, Wallet Investor expected the stock price to drop in the same period.
Bear in mind that stock markets remain volatile, and there may be price fluctuations. Both analysts and algorithm-based websites do get their predictions wrong. Always rely on your research. And never invest money that you cannot afford to lose.
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