PayPal NASDAQ: PYPL has underperformed the overall market this year, with the stock down 2.72% YTD. However, the fintech giant is gaining attention after shares have soared almost 10% in the last month. The recent surge warrants a closer look at the company's fundamentals and technicals. The stock appears to be staging a comeback, and at first glance, shares of PayPal are still trading at an attractive, undervalued price, although up close to 10% over the last month.
Where Shares Have Come From
The stock has sold off significantly since putting in a textbook double top, and all-time high, at $310.16 in July 2021. Since topping out, shares of PayPal have fallen about 77% to a current price of $70.37. Despite the sharp decline from the ATH, optimism has returned as the stock looks to break the downtrend and build on recent momentum.
PayPal's recent rally off the 52-week lows has allowed an intriguing setup on the daily chart to form. The stock's downtrend and the 200-day SMA are converging around $75. The downtrend's resistance and the key moving average now represent a significant inflection point. A significant shift in momentum will be confirmed if shares of the fintech giant can break above the downtrend's resistance and the critical area of $75.
After soaring almost 10% in the past month, the stock is still trading at an attractive level, below the short-term resistance, with a current RSI of 62.97. The company's forward P/E ratio of 12.27 versus its trailing P/E of 29.33 indicates that analysts expect earnings to increase.
Impressive Earnings Growth
The company announced first-quarter earnings in May and beat analysts' estimates for both EPS and revenue. PayPal reported $1.17 EPS for the quarter, topping the consensus estimate of $1.10. The company had revenue of $7.04 billion for the quarter, beating analyst estimates of $6.99 billion.
The company raised its full-year earnings guidance to reflect its stronger-than-expected Q1 earnings. PayPal said it expects EPS to grow 24% - 26% to $1.15 to $1.17 on revenue growth in a range of 6.5% to 7%. PayPal also noted that it expects adjusted EPS for the full year to grow by 20% to $4.95, up from the prior guidance of 18%.
PayPal Expects $5 Billion In Buybacks
On the 20th of June, PayPal announced a deal with global investment firm KKR. Per the announcement, KKR agreed to purchase up to 40 billion euros of eligible current and future PayPal Pay Later loans originated in Europe. PayPal said that it expects to allocate approximately $1 billion to incremental share repurchases this year, bringing its total outlook for share repurchases in 2023 to $5 billion.
The share repurchases will decrease the number of PayPal outstanding shares, increasing the company's EPS.
Analysts Are Bullish
Based on 36 analyst ratings, the stock has a consensus rating of Moderate Buy. The consensus price target is $97.35, implying a 38.11% upside. Of the 36 analyst ratings, 23 have PayPal stock as a Buy, with only 1 rating as a Sell. Most recently, Piper Sandler lowered their price target from $83 to $80, predicting a 16.19% upside. On the 14th of June, BTIG Research initiated coverage of PYPL with a Buy rating and a $85 price target.
Should You Invest?
Despite underperforming the market this year, PayPal has shown promising signs of a comeback with a recent surge in its stock price. The company's fundamentals, including impressive earnings growth and a positive outlook, support the potential for further upside. With a consensus rating of Moderate Buy and an attractive price target, analysts remain bullish on PayPal's stock, suggesting that it may be a worthwhile investment opportunity.
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