Tuesday Morning, Susquehanna analyst James Friedman downgraded PayPal stock from “buy” to “neutral”. As you would imagine, this has caused a slight dip in the company’s stock price – but not nearly to the extent of other stocks that have recently been downgraded, such as Adobe. So – if you’re currently invested in PayPal, what does this news mean for you? We’ll take an unbiased, emotionless look at PayPal stock through the VectorVest system momentarily. First, let’s explain what has analysts worried about the company as a whole.
PayPal has had a tough year – as have most companies trading on the stock market amidst sky-high inflation and looming recession fears. In the past year, PYPL stock has dropped 65%. But, the company has begun a rally in the past three months – jumping up 24% and leveling out over the last month. You may not have realized that PayPal operates a host of payment processing companies under their umbrella – Venmo, Xoom, Paydiant, and the most relevant to today’s conversation, Braintree.
Braintree is the focus of concern for analysts. While the payment processor is gaining share rapidly within PayPal’s portfolio, this news isn’t as good as you may assume. The reason for concern is low margins dragging down PayPal’s performance as a whole. Analysts suggest that Braintree creates a risk of negative leverage within PayPal – and because of this, they have downgraded PayPal to neutral.
Does this mean that if you’re currently invested in PayPal, you should sell off your shares now? Or, should you keep waiting to see how the stock rallies from this news – as it appears they are on the right track to finishing the year strong? Fortunately, you don’t have to play the guessing game. With VectorVest’s tried-and-true system for stock analysis, you can gain accurate, emotionless insights to help you win more trades. The best part? It simplifies your investment strategy and changes the way you trade forever. Let’s take a look at what the system has to say about PayPal…
Despite Poor Upside Potential, PYPL Has a Positive Price Trend Right Now
VectorVest’s stock analysis software tells you everything you need to know about a stock with three simple ratings: Relative Value (RV), Relative Safety (RS), and Relative Timing (RT). These ratings sit on a scale of 0.00-2.00 – with 1.00 being the average, and the higher end of the range outperforming the average. Together, these make up the overall VST rating a stock is given. And from that figure – the system can provide a clear buy, sell, or hold recommendation for any given stock, at any given time.
So what’s going on with PayPal?
- Poor Upside Potential: RV is an indicator of long-term price appreciation potential – projected up to three years out. As for PayPal, the RV rating of 0.62 is poor. Furthermore, VectorVest calculates the true value of this stock at $40.52, more than 50% lower than where the price sits today. It’s overvalued.
- Fair Safety: This risk indicator is calculated based on an in-depth analysis of the consistency and predictability of a company’s financial performance, business longevity, debt-to-equity ratio, and more. As for PayPal, the RS rating of 0.95 is fair. However, another indicator the VectorVest system offers is the Comfort Index – which speaks to a company’s ability to withstand lengthy/severe price declines. When it comes to PYPL, (CI) rating of 0.31 is very poor
- Good Timing: This is the one bit of good news for those invested in PayPal right now. The RT rating of 1.17 is good – showing a positive price trend with wind in its sails. This is calculated based on the direction, dynamics, and magnitude of the stock’s price movement.
All this considered, PYPL has a fair VST rating of 0.96 – just short of the average. But does that mean it’s time to sell, or should you keep holding this stock for the time being? If you want a clear answer as to what your next steps should be, you can analyze PayPal stock free to discover the VectorVest recommendation.
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VectorVest advocates buying safe, undervalued stocks, rising in price. As for PYPL, it has poor upside potential with fair safety. However, it does have a positive price trend pushing the stock’s price upwards.
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