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• PayPal share price has crashed from $311 in 2021 to $57.
• There are concerns about the company’s gross margins.
• Some analysts believe that the company is facing competition from Apple Pay.

PayPal's (Nasdaq: PYPL) stock price has been dead money for a while. After peaking at $311 in 2021, the shares have plunged by over 81% to the current $57. This crash has brought its market cap from over $300 billion to $64 billion. 
 

Gross margins and competition

PayPal's share price has been in a strong downward trend in the past two years as investors remain concerned about its business growth. In a recent note, analysts at MoffettNathanson downgraded the company, citing its thinning gross margins and rising competition from the likes of Apple Pay. 

PayPal’s Braintree business competes with Apple Pay, which is now being used by millions of Americans per day. As a result, the analyst warned that competition for market share could hurt PayPal’s gross and profit margins. 

PayPal’s business is slowing as evidenced by the recent earnings. Revenue increased by just 8% in Q2 to $7.3 billion. At its peak, PayPal was a growth monster that recorded double-digit growth in most quarters. 

Still, a case can be made for investing in PayPal as its stock sits at its lowest level this year.  First, PayPal has transitioned from a growth company to a value one. While its growth has slowed, PayPal is still a highly profitable company. Its net income in the second quarter came in at over $1 billion, a big improvement from the $341 million loss it made in the same quarter in 2022.

Further, while PayPal does not pay dividends, the company has been actively reducing its outstanding shares. Its shares stood at over 1.18 billion in 2019 and 1.10 billion today. Share repurchases help existing shareholders by improving the earnings per share.

Most importantly, PayPal is a quality company with a huge user base and market share. PayPal has over 420 million users internationally. It is also expanding its business in key areas like Buy Now Pay Later (BNPL)

On a minor note, PayPal is benefiting from the rising interest rates. In the last quarter, the firm spent over $85 million in interest expense and then gained $111 million in interest income. Also, the company has a new CEO, who will lead the turnaround.
 

PayPal stock price forecast

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The daily chart shows that the PYPL stock price has been in a strong bearish trend in the past two years. It recently broke below the lower side of the descending triangle pattern shown in red at $68. It has now found strong support at $59.10, the lowest level since May 15th. The shares have moved below the 50-day and 100-day moving averages. 

Therefore, technicals suggest that the stock will continue falling as sellers target the key support level at $50. In the long term, however, the shares will likely bounce back as investors buy the dip. This will likely happen after the company publishes its financial results. 

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