PayPal Stock: The More It Drops The More I Buy

PayPal's (PYPL) stock has been in a downward spiral for months now. Moreover, the company's share price took an additional leg lower after PayPal's "difficult" quarter and lowered guidance last month. Now, the stock is highly oversold, while PayPal's growth story remains robust and attractive going forward. Moreover, PayPal's valuation has been adjusted, and shares trade at only 35 times consensus forward EPS estimates. As PayPal's profitability increases, the company's stock price should move substantially higher in future years. I've been a supporter of PayPal for a long time, and I am buying this drop as I am doubling my position right here.

PayPal 1-Year Chart

PayPal stock drops from recent all-time-high

Source: stockcharts.com

We've seen PayPal's stock get crushed lately. Shares are down by 40% since the stock hit an all-time high ("ATH") around $310 earlier this year. In fact, we see a double top, after which the stock has made a series of lower lows and lower highs. The $64,000 question - is the selloff over?

We see some stabilization around the critical $180 area of support. Moreover, we saw the relative strength index ("RSI") hit a rock-bottom low 20 level, implying highly oversold conditions in the stock. The full stochastic and the CCI are starting to turn upward, suggesting that a shift to a more positive momentum is likely occurring now. If PayPal can remain above $180 support, shares can probably recover, move up towards the unfilled gap at $225-230, and could potentially continue to move higher after that.

Why Is The Stock Down In The First Place?

While PayPal's stock attempted a move towards new ATHs in early September, it failed technically. After this disappointment, we saw shares move lower into November 9th earnings. Now, PayPal's stock took a nosedive post Q3 earnings, as the company guided to lower full-year revenues. PayPal said it expects to see around an 18% YoY rise in revenues, suggesting sales of about $30 billion relative to consensus forecasts of around $31.6 billion for fiscal 2022. A series of lower price target adjustments from analysts covering the stock followed the report, and shares have been under pressure ever since. Yes, the company's growth story is slightly slower than some highly bullish analysts had expected, but is this dynamic worth a 40% drop in the stock?

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Disclosure: I/we have a beneficial long position in the shares of PYPL, GOOG either through stock ownership, options, or other derivatives.

Disclaimer: This article expresses solely my ...

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