PayPal analysts seem to like a lot, but not right now

(Bloomberg) – Although PayPal Holdings Inc. has been swept up in the divestment of technology stocks, the investment case of the digital payment company has only become stronger, in the opinion of analysts, given its record low valuation and trends in favor of e-commerce.

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Wall Street sees the company’s shares jump 90% over the next year, according to data collected by Bloomberg. With Etsy Inc. has a stronger potential return among companies in the S&P 500. The Paypal share rose 0.5% in early trading on Monday.

Brokers are less optimistic in the short term and halve their overall target for PayPal’s stock price. Still, the stock has fallen even faster, making it a good buy at these levels, according to bullish investors.

“The PayPal story is still very strong in the long run,” said Hans Albrecht, portfolio manager at Horizons ETFs Management. “At some point, the tide will turn as valuations start to look very interesting.”

PayPal’s stock has fallen more than 70% since its peak in July, erasing all of its pandemic-driven gains. This is because consumers are cutting back on online shopping as the declining pandemic sends them back to the shops, and also because once a generation inflation levels push up prices.

For the first time, equities are now cheaper than the Nasdaq 100 index at 17 times the estimated earnings against a multiple of 22 for benchmark. Other payment stocks are even more expensive, with Visa Inc. on a multiple of 27, Mastercard Inc. at 32 and Block Inc. on the whole 71.

In February, PayPal announced that spending growth on their platform was slowing as in-store shopping made a comeback, predicting revenue growth that was below analysts’ expectations. Brokerages have since reduced their sales growth prospects to 15.5%, the lower end of the firm’s forecast of 15% to 17%.

Paypal suffered a major stock drop in the wake of this report three months ago, as did megacaps Meta Platforms Inc. and Netflix Inc. when they announced disappointing fourth quarters. Last week, Netflix tumbled again with first-quarter results; investors will now see earnings from Paypal and Facebook owner Meta on Wednesday to see if they also disappoint again.

Citigroup Inc. analyst Ashwin Shirvaikar sees a digital trading opportunity for PayPal for many years.

“This is particularly relevant given the recent shift in consumer behavior towards digital channels and its long-term platform capability, which we believe has an ongoing multi-year impact on the growth rate,” he said in a note released late Friday. Shirvaikar maintained its buy rating on the stock, but reduced its stock price target to $ 140 from $ 185.

Today’s technical diagram

The sale of technology shares puts investors on edge, just as some of the largest companies are preparing to report quarterly earnings. The Nasdaq 100 index fell 3.9% last week, hit by investors’ concerns that the Federal Reserve will be more aggressive than expected in tightening monetary policy. The technology-heavy benchmark fell for the third week in a row, its longest losing streak since October, with $ 1.89 trillion in market value wiped out in that period.

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(Adds Shares in Section 2.)

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