PayPal stock price forecast: PYPL comeback could be epic

PayPal (NASDAQ: PYPL) stock price is underperforming the market this year as concerns about the company’s growth accelerated. The stock has risen by about 8% this year, lagging the S&P 500 and Nasdaq 100 indices. It has also underperformed other fintech companies like Root, Adyen, and Fiserv.

PayPal is facing headwinds

PayPal, the giant fintech company, is going through major headwinds as its growth slows.

PayPal’s key challenge is that it is facing major competition across all its business segments. Venmo is seeing strong competition from Venmo. Similarly, PayPal’s payment applications is contending with competition from the likes of Remitly and Wise.

Its unbranded business, which is made up of Braintree, is seeing substantial competition from the likes of AfterPay, Affirm, and Klarna.

The most recent results showed that the company’s growth is slowing. Its total revenue rose to $8.02 billion in the fourth quarter, up from $7.38 billion in the same period in 2022.

Analysts believe that this slowdown continued in Q1. The average estimate is that its revenue rose to $6.92 billion in Q1 followed by $7.01 billion in the current quarter.

While these are good numbers, they represent a lower growth rate than what PayPal used to do before. Its five-year revenue growth average was about 15%.

Further, PayPal’s entry into the stablecoin market is not working as expected. When it launched the PYUSD token, the hope was that the company would give the likes of Tether and USD Coin a run of their money.

That has not happened as PYPL has attracted less than $200 million in total assets. This makes it a small part of the stablecoin market that is valued at over $130 billion.

Therefore, it is hard to see the catalyst that will reinvigorate PayPal’s growth. That means that the company should now be valued as a slow-growing value company.

PayPal is still undervalued using this metric. It has a forward PE ratio of 17.85 and a forward EV to EBITDA ratio of 9.35. In contrast, the S&P 500 index has a forward PE multiple of over 20.

PayPal stock price forecast

PYPL chart by TradingView

The PYPL share price is being supported by strong technicals. Turning to the daily chart, we see that the stock has formed an inverse head and shoulders pattern, which is a bullish sign.

It has also formed a golden cross pattern as the 200-day and 50-day moving averages have made a bullish crossover. The stock has also formed a break and retest pattern, by retesting the descending trendline that connects the highest swings since February last year.

Therefore, the outlook for the PayPal stock price is bullish for now. This view will be confirmed if it moves above the crucial resistance point at $68.12, its highest swing in January and March. If this happens, the next point to watch will be at $76.52, its highest level in July last year

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