PayPal (PYPL) delivered first-quarter earnings on Monday after the market closed. The market responded Tuesday by sending shares off a cliff, as the company has lost more than 10% since.
This reaction has many perplexed as the earnings report was mostly positive. PayPal saw a 10% growth in total payment volume year over year with a figure of $354.5 billion. Meanwhile, earnings per share spiked 33% year over year to $1.17.
On top of these key financial improvements, the company took the opportunity to raise guidance for revenue and profit for the full year. What’s more, management approved a $4 billion stock buyback program. So – what has the market scared?
Well, according to CNBC’s Deirdre Bosa, it’s the fact that management also cut the margin outlook coupled with the competition. In looking at the landscape PayPal operates within, it’s clear that the company faces fierce competition from rival Block and many others.
But in comparing PayPal to Block side by side, the former appears to win out in every aspect – except one crucial component: Valuation. The forward PE ratio for Block is 35.64, while PayPal’s isn’t even half at 13.73.
Beyond the financial side of things, analysts believe that Block has done a better job of innovating and getting investors excited than PayPal, which could be another reason investors are jumping ship.
So – is this another case of market sentiment sending shares down, or is there a legitimate issue with PayPal? In looking at the stock’s performance, it’s lost more than 22% in the past 3 months. Momentum was shifting last week, and the stock was actually up 6% Monday before the earnings report. That trend has been wiped out, though.
If you’re currently invested in PayPal or are wondering if there’s a play here for you, keep reading below. We found a few things you need to see through the VectorVest stock analysis software.
PayPal Has Good Upside Potential and is Fairly Safe, But the Timing is Poor for This Stock
The VectorVest system simplifies your trading strategy by telling you what to buy, when to buy it, and when to sell it. This saves you time and stress while helping you win more trades.
This is possible through the proprietary stock-rating system. You’re given all the insights you need through three simple ratings: relative value (RV), relative safety (RS), and relative timing (RT).
Each rating sits on a scale of 0.00-2.00, with 1.00 being the average. And based on the overall VST rating for a stock, VectorVest issues a clear buy, sell, or hold recommendation. As for PYPL, here’s what you need to know:
- Good Upside Potential: The RV rating compares a stock’s long-term price appreciation potential to AAA corporate bond rates and risk. As for PYPL, the RV rating of 1.23 is good. And, the stock is undervalued as it stands today - with a current value of $87.
- Fair Safety: In terms of risk, PYPL is a fairly safe stock - as evidenced by the RS rating of 0.95. This is derived from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity.
- Poor Timing: The major issue for PYPL right now is the negative price trend that has taken hold since Tuesday. The RT rating of 0.68 is poor and is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week over week, quarter over quarter, and year over year.
The overall VST rating of 0.95 is fair - but it is slightly below the average. So, what does that mean for you? Should you buy, sell, or hold PYPL right now? A clear answer on your next move is awaiting you at VectorVest - get a free stock analysis today to feel confident making a decision one way or the other!
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VectorVest advocates buying safe, undervalued stocks, rising in price. As for PYPL, the stock has good upside potential and fair safety - but after Monday evening’s earnings release, the timing is poor.
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