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After declining more than 80% from its 2021 high, PayPal ((PYPL - Free Report) ) stock is rising from the dead. And though it took more than a year of sideways action near the lows, it’s not that surprising. While there is considerable competition in the payments industry, PayPal has remained a stalwart in the online payments space, steadily growing its sales and earnings over the years even though its stock has suffered.
Today, PayPal is trading like a leading stock again, outperforming the broad market and forming a technical bull pattern on the chart. The company is also trading at a historical discount and appears to be successfully entering other segments of the industry such as tap-to-pay.
Especially encouraging is its relative outperformance this year versus serval prime names in the sector. PayPal has shown considerable outperformance against fellow newcomer in the payments space Block ((SQ - Free Report) ), but also incumbents Visa ((V - Free Report) ) and Mastercard ((MA - Free Report) ). All these factors together make PayPal a must watch stock.
Image Source: Zacks Investment Research
PayPal Technical Setup
After the stock bottomed in late 2023, it began building out a clear technical base. Investors had to be patient with this stock, as it really took its time trading sideways and testing the true believers. In the analyst community there has been much back and forth about PayPal’s future.
But after clearing the $64 level in August, then consolidating and breaking out again in September, the stock has tested the doubters. Now, after the initial momentum gathered through summer, PayPal has again consolidated into its most convincing pattern on the chart.
Over the last three weeks, PYPL stock has formed a tight bull flag indicating higher prices may be coming soon. If the stock can break out and hold above the $82 level, I would expect another large bull run to ensue. Alternatively, if it loses the $79.50 level of support, the setup is invalidated, and investors may want to wait for another opportunity.
Image Source: TradingView
PayPal Stock Trading at Historical Discount
PayPal is currently trading at a significant relative discount to its historical average. At 18.2x forward earnings today, it is well below the market average and its 10-year median of 37.6x.
Also notable is its valuation compared to other names in the industry. As of today, Square is trading at a one year forward earnings multiple of 42.7x, Visa at 25.7x, and Mastercard at 35.8x. Clearly, PayPal is the cheapest of the bunch.
Image Source: Zacks Investment Research
Should Investors Buy PYPL Shares Now?
Because of the extreme pain that PayPal stock and shareholders experienced these last few years, it has very much fallen under the radar for most. That presents a tremendous opportunity for the discerning investor.
In addition to the bullish catalysts mentioned, it is also worth noting that PayPal currently has a Zacks Rank #3 (Hold) rating, though it has seen some small revisions higher to its earnings estimates.
While investors should be mindful of the intense competition in the payments market, I believe that PayPal’s technical setup and relative outperformance compared to Visa, Mastercard, and Square as well as its relatively cheap valuation make it a compelling consideration for traders seeking momentum trades.
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Momentum Alert: PayPal Stock is Making a Comeback
After declining more than 80% from its 2021 high, PayPal ((PYPL - Free Report) ) stock is rising from the dead. And though it took more than a year of sideways action near the lows, it’s not that surprising. While there is considerable competition in the payments industry, PayPal has remained a stalwart in the online payments space, steadily growing its sales and earnings over the years even though its stock has suffered.
Today, PayPal is trading like a leading stock again, outperforming the broad market and forming a technical bull pattern on the chart. The company is also trading at a historical discount and appears to be successfully entering other segments of the industry such as tap-to-pay.
Especially encouraging is its relative outperformance this year versus serval prime names in the sector. PayPal has shown considerable outperformance against fellow newcomer in the payments space Block ((SQ - Free Report) ), but also incumbents Visa ((V - Free Report) ) and Mastercard ((MA - Free Report) ). All these factors together make PayPal a must watch stock.
Image Source: Zacks Investment Research
PayPal Technical Setup
After the stock bottomed in late 2023, it began building out a clear technical base. Investors had to be patient with this stock, as it really took its time trading sideways and testing the true believers. In the analyst community there has been much back and forth about PayPal’s future.
But after clearing the $64 level in August, then consolidating and breaking out again in September, the stock has tested the doubters. Now, after the initial momentum gathered through summer, PayPal has again consolidated into its most convincing pattern on the chart.
Over the last three weeks, PYPL stock has formed a tight bull flag indicating higher prices may be coming soon. If the stock can break out and hold above the $82 level, I would expect another large bull run to ensue. Alternatively, if it loses the $79.50 level of support, the setup is invalidated, and investors may want to wait for another opportunity.
Image Source: TradingView
PayPal Stock Trading at Historical Discount
PayPal is currently trading at a significant relative discount to its historical average. At 18.2x forward earnings today, it is well below the market average and its 10-year median of 37.6x.
Also notable is its valuation compared to other names in the industry. As of today, Square is trading at a one year forward earnings multiple of 42.7x, Visa at 25.7x, and Mastercard at 35.8x. Clearly, PayPal is the cheapest of the bunch.
Image Source: Zacks Investment Research
Should Investors Buy PYPL Shares Now?
Because of the extreme pain that PayPal stock and shareholders experienced these last few years, it has very much fallen under the radar for most. That presents a tremendous opportunity for the discerning investor.
In addition to the bullish catalysts mentioned, it is also worth noting that PayPal currently has a Zacks Rank #3 (Hold) rating, though it has seen some small revisions higher to its earnings estimates.
While investors should be mindful of the intense competition in the payments market, I believe that PayPal’s technical setup and relative outperformance compared to Visa, Mastercard, and Square as well as its relatively cheap valuation make it a compelling consideration for traders seeking momentum trades.