PayPal (PYPL) is a technology platform and app that enables digital and mobile payments. I am bullish on the stock.
Over the past two decades, PayPal has been a major competitor in the digital payments space.
Yet, Wall Street doesn’t seem to appreciate PayPal’s contribution to the modern economy. As we’ll see, one big-name analyst, in particular, doesn’t seem too impressed with PayPal lately.
Moreover, PYPL stock has been on a downtrend recently. Nonetheless, there may be a prime buying opportunity for contrarian investors here. (See Analysts’ Top Stocks on TipRanks)
A Quick Look at PYPL Stock
From a technical standpoint, there’s definitely been damage done to PYPL stock.
The stock started 2021 with a bang at $200 and moved up rapidly early in the year.
However, PYPL stock ended up hitting the same $309 resistance level twice – first in February and then again in July.
That price point proved to be an ideal place to take profits, as the PayPal share price tanked in late July and kept on falling through the end of November.
With PYPL stock currently in the mid $180’s, value hunters should be eager to own some shares.
After all, the share price decline brought PayPal’s 12-month price-to-earnings ratio down to 45x, which is relatively low for this company.
Not the Worst Downgrade
Investors should be on the lookout for analysts’ upgrades and downgrades on their favorite stocks – no doubt about that.
On the other hand, it’s essential to be aware of the nuances within those upgrades and downgrades.
Some downgrades are quite harsh, while others aren’t all that bad. Consider, for example, Bernstein’s recent downgrade of PayPal.
Reportedly, the analyst firm cut its rating on PYPL stock from “outperform” to “market perform.” That’s not the worst downgrade I’ve ever seen, by a long shot.
Also, Bernstein reduced its price target on the stock from $260 to $220 per share. Heck, that’s still above where it’s currently trading, so apparently, there’s still room for upside.
Supposedly, the Bernstein analysts are concerned that PayPal is suffering a potential death “from a thousand cuts” because rival payments companies are eating away at PayPal’s business.
Still a Thriving Business
Sure, there’s competition in the digital payments space.
Yet, this doesn’t mean that PayPal’s business isn’t able to flourish amid the competition.
Just check the data: in Q3 2021, PayPal earned an adjusted $1.11 per share, while Wall Street was only expecting $1.07 per share.
During that same time frame, PayPal generated $6.18 billion in revenues – not too shabby.
With that in mind, perhaps investors should listen to BTIG analyst Mark Palmer.
He recently encouraged investors to “strongly consider buying the dip” on beaten-down names like PayPal as they look for stock-picking opportunities amid the “fintech equity carnage.”
Wall Street’s Take
Turning to Wall Street, PYPL earns a Strong Buy consensus rating based on 25 Buys, five Holds, and one Sell rating. The average PayPal price target is $276.07, implying 47.5% upside potential.
The Takeaway
Some analysts will like PayPal now, while others won’t.
Plus, PayPal has stiff competition – there’s no denying it.
However, PayPal has demonstrated that the company is still quite capable of generating strong revenues and profits.
Therefore, it’s likely a great time for contrarian investors to go bargain-shopping with PYPL stock.
Disclosure: At the time of publication, David Moadel did not have a position in any of the securities mentioned in this article.
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