The PayPal stock price has fallen back to earth as demand for fintech companies waned. PYPL shares are trading at $81 75, which is significantly lower than its all-time high of over $350. As a result, its total market cap has dropped to about $91 billion.
Why has the PYPL stock crashed?
There are three main reasons why the PayPal stock price has crashed hard in the past few months. First, the decline is in line with the overall performance of other fintech companies like Affirm, Block, and Shift4 Payments. It is also in line with the performance of other tech companies like Amazon, Alphabet, and Netflix.
Second, the stock has dropped because of the ongoing rotation from lockdown stocks to reopening ones. For one, PayPal was one of the biggest beneficiaries of the pandemic as the number of users surged to over 426 million. Therefore, with the world reopening, investors believe that the company will see a slower revenue growth in the coming months.
Third, industries that PayPal was betting on have come under intense pressure. For example, its investments in cryptocurrencies have not had strong results as the total value of cryptocurrencies has crashed hard in the past few months. The same is true with its investments in the Buy Now Pay Later (BNPL) industries. Other firms in the industry like Block, Klarna, and Zip have suffered as interest rates surge.
Is PayPal a good investment?
There are reasons to believe that PayPal is a good investment. First, PayPal is one of the most popular fintech companies in the world with over 420 million users. As such, it will always have a way to monetize these people. It will always be a strong free cash flow machine.
For example, the firm expects to have a net revenue growth of between 11% and 13% this year. It also expects to add over 10 million new users this year.
Second, the recent performance of the stock has made the firm significantly undervalued compared to where it was a few months ago.
Finally, PayPal will likely deliver stronger results than expected when it publishes its results next week. The firm guided net revenue to be about $6.8 billion, which was a bit cautious.
PayPal stock price forecast
The daily chart shows that the PayPal stock price has been in a strong bearish trend in the past few months. This decline saw it drop to a low of $67.
The stock remains below the 25-day and 50-day moving averages while the Relative Strength Index has moved above the oversold level of 50. A closer look shows that the stock has formed w strong bottom at $67. Therefore, a bullish break-out cannot be ruled out in the near term as investors buy the dip.