PayPal stock price on Tuesday, when it publishes its first-quarter financial results, will show whether its business is growing or not. While the PYPL shares have bounced back in the past few days, they remain significantly lower than their 2024 highs. They have dropped by 30% from the highest level last year.
PayPal share price also remains 80% below its all-time high. It has gone through a $310 billion wipeout as the market cap has dropped from a record high of $380 billion to the current $69 billion. This article explores why PayPal has become a fallen angel and whether its stock will bounce back after its earnings.
PayPal is no longer a growth company
The primary reason why the PayPal share price has crashed is that it is no longer the growth machine it was a few years ago. That’s because all its business segments have become disrupted by larger companies.
The main wallet business that lets users send money has been disrupted by firms like Google, Amazon, and Apple that have a large ecosystem.
Additionally, companies like Stripe, Square, Adyen, Worldpay, and Checkout.com have continued to disrupt its unbranded business.
While the market opportunity in all these industries is large, it also means that competition is also substantial.
PayPal’s business is also being disrupted by neobanks and companies in the crypto industry like Coinbase and Binance.
As a result, PayPal’s revenue growth has slowed. Its annual revenue rose to $31.8 billion in 2024, up from $29.7 billion the previous year.
The most recent results showed that PayPal’s revenue rose by 4% to $8.34 billion as the number of monthly active accounts rose by just 2% to 229 million. PayPal’s operating income fell by 17% as the margin fell by 431 basis points to 17.2%.
Read more: PayPal stock price forecast: why PYPL is crashing, and what next
Q1 earnings ahead
The next key catalyst for the PayPal share price will be its first-quarter earnings, which will come out on Tuesday.
These numbers will provide more information on its business performance and whether its initiatives are gaining traction.
The average estimate is that PayPal’s revenue will be $7.85 billion, a 1.85% annual growth rate. This is a tiny rate for a tech company that was once seen as a potential challenger to Visa and Mastercard.
Wall Street analysts anticipate that its earnings per share will be $1.16, an increase from the $1.08 it made in Q1’24. They also expect that its annual revenue will be $32.9 billion this year and $35 billion next year.
The only positive thing for PayPal is that it has become a bargain. The data shows a trailing twelve-month price-to-earnings ratio of 16 and a forward multiple of 13.
It is also taking initiatives to boost its stock price, including its share buybacks. These repurchases have reduced the outstanding shares from 1.17 billion in 2021 to 997 million today.
Read more: PayPal stock analysis: will the Honey scam allegations bite?
PayPal stock price analysis
The daily chart shows that the PYPL share price has been in a strong downtrend in the past few months. This retreat happened after it formed a double-top pattern at $93.15. Its neckline was at $81.75.
The stock has bounced back after falling to the support at $57.50. A closer look shows that it is forming an inverse cup and shoulders pattern, a popular continuation sign. It is now forming the shoulder section.
The stock also formed a death cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other. Therefore, the PayPal stock price will likely resume the downtrend and possibly move below $50 in the coming weeks. A rebound above $70 will point to more gains.
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