PayPal Stock Faces Technical Headwinds, But Analysts Remain Optimistic
PayPal Holdings Inc. (PYPL) is facing a potential "Death Cross," a technical indicator that suggests further downside risk. This occurs when the 50-day simple moving average falls below the 200-day moving average. Despite the stock's recent struggles, analysts at Mizuho maintain an "Outperform" rating with a $96 price target.
Technical Indicators Point to Bearish Trend
PayPal's stock price has been under pressure, declining 23.7% year-to-date and 5.7% in the past month. Key technical indicators reinforce the bearish trend. The 8-day and 20-day moving averages suggest weakness, while the 50-day and 200-day moving averages highlight the broader downtrend. The MACD indicator signals further downside risk, and the RSI indicates oversold territory.
Mizuho Remains Optimistic About Long-Term Prospects
Despite the technical challenges, Mizuho remains optimistic about PayPal's long-term prospects. They see growth potential in Pay with Venmo, which boasts higher transaction margins than PayPal's traditional checkout service. Mizuho expects Pay with Venmo's Total Payment Volume to grow over 40% annually, significantly boosting overall transaction margin dollar growth.
Valuation and Strategic Initiatives
PayPal's valuation stands at 17 times its estimated 2026 earnings per share, slightly above the median for legacy payments firms but still below historical levels. Mizuho believes the company's strategic initiatives, including user experience improvements and Fastlane adoption, justify this premium.
Growth Plans and Potential Catalysts
PayPal is pushing forward with growth plans. The recent appointment of Microsoft's Joy Chik to the Board signals a focus on AI-driven innovation. Additionally, Apple's decision to open its NFC chip to third-party apps could enable PayPal to expand tap-to-pay services, a potential game-changer in mobile payments.
Conclusion
While the current trend remains bearish, PayPal's strategic initiatives could drive future growth and potentially defy the skeptics. The potential "Death Cross" serves as a technical warning, but Mizuho's optimism and PayPal's growth plans offer a counterpoint to the bearish sentiment.