Why is Everyone Talking About PayPal?
The stock is bouncing off its lows. Bullish or Bearish?
- PayPal is near the low of the year, but the company continues to report strong earnings numbers.
- The stock could see a 10% move through the rest of the year.
- PayPal now has its own stablecoin, PayPal USD, backed by the U.S. dollar.
PayPal (PYPL) posted its third straight daily stock price gain in a row today, something that hasn't happened for over a month.
The stock has had a rough go of it in August so far, falling from a monthly high of $76.28 to as low as $57.29 realized a few days ago. Even with the stock price mayhem, the payment processing company has beat earnings per share (EPS) and revenue expectations three out of the last four quarters.
The expected move through the rest of 2023 based on current implied volatility is just over +-$10, which is over 10% of the value of the stock price. When you compare the 2023 chart of PYPL to the income and balance sheet for the past few years, we're seeing an opposing trend - revenue and assets have both almost doubled from 2017 to now, while the stock price is falling to new 2023 lows.
PayPal releases a new stablecoin
PayPal USD (PYUSD) is the fintech company's confidence boost into the world of digital currencies, which is backed by the U.S. dollar. With such an uncertain sentiment around cryptocurrencies and how the big tech companies will adopt the technology, it's a breath of fresh air to see a huge company like PayPal create its own stablecoin. The product acts as a gateway from fiat to digital, and it's only a matter of time before it's widely available on Venmo and other cash apps.
A bearish case for PayPal
After experiencing an almost $20 drop from the $75 range in just a few weeks, volatility to the downside should not be taken lightly. The market doesn't seem to like what PayPal had to say on its last earnings call, even though fundamental figures seem satisfactory. Any sort of negative sentiment in the stock could result in continued selling.
A bullish case for PayPal
The company is trading near lows for the year, and it has posted strong earnings reports in the past four quarters. Bears in the space may not be isolating PayPal, as the entire sector has taken a hit recently. Block Inc (SQ) has also fallen from grace, and yet these two products are widely used across the country and beyond, with products like Venmo under the PayPal umbrella. Many bulls simply look to the price to earnings ratio on a stock that has taken some heat recently, and PayPal has one of the lowest in the sector at around 16.62 after the recent rally.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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