PayPal Holdings, Inc. (NASDAQ:PYPL) is among the worst-performing stocks this year. The stock has been under extreme pressure from various macroeconomic forces, including rising inflation and falling online payments.
The stock is also under pressure from a generally declining market and the geopolitical risks emanating from the Russia-Ukraine war. In response to sanctions against Russia, PayPal suspended payments for all Russian accounts. These developments will have a huge impact on the top line.
The latest earnings release by PayPal is probably one of the most critical factors driving the share downwards. While the company beat revenue expectations, it also downgraded its guidance for this year. Traders immediately discounted this news resulting in further downward pressure on the stock. The revised guidance, however, does not capture the complete picture of PayPal’s fundamental strengths.
PayPal has been a profitable business for more than a decade, and its revised guidance is unlikely to significantly impact the company’s profitability. In any case, the revised guidance only points to the possibility of slower growth in revenues, not the lack of growth or a reduction in revenues. The guidance communicates mainly to the expectations of the emotional investors. To the rational investor, PayPal remains an important stock pick.
PayPal signals the beginning of a bullish trend
Source – TradingView
Technical analysis shows that PayPal broke below the emotion $100 level, finding the next level at $95. Within the week, PYPL may hit the low of $86 as projected in the earlier analysis. However, after hitting these lows the share is expected to trend upwards as supply wanes.
The RSI at 17.06 is way below the level 30 signal for oversold assets. MACD highlights an overall bearish trend but with two important trends. The first is the upward sloping histogram, and the second is the narrowing divergence between MACD and the signal currently at -6.87. These signals indicate PayPal is a buy even before it hits the projected lows.
Summary
PayPal is among this year’s worst-performing stocks. The current sub-100 price is a major bargain for the patient investor. RSI indicates the stock is oversold, and the MACD histogram is signaling the beginning of an upward trend.
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