PayPal Share Price Forecast December 2021 – Time to Buy PYPL?

Shares of payment processing company PayPal (NASDAQ: PYPL) are in the green today, after closing at $191.88 as of December 30^th (19:59 EST). Since the stock peaked in July PayPal investors have weathered a 38% decline. It is now down 18% in 2021.

PayPal – Technical Analysis

PayPal’s financial statement indicates a market cap of $225.446 billion with total assets worth $74.534 billion. Revenue for 2020 was at $21.43 billion with a profit margin of 19.60% compared to $17.53 billion in 2019.

Oscillators such as Relative Strength Index (14)(46.94), Stochastic %K (14, 3, 3)(61.38), Commodity Channel Index (20)(67.58), Average Directional Index (14)(25.74) and Awesome Oscillator(−0.72) are neutral. Moving averages such as Exponential Moving Average (10)(190.19),  Simple Moving Average (10)(189.44), Exponential Moving Average (20)(191.44), Simple Moving Average (20)(189.14) are indicating a buy action.

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Recent Developments

PayPal has pulled back sharply due to several factor. Firstly, PayPal was strongly valued coming off a strong year in 2020, when its price jumped 116%. The global payment industry carried the market last year through a difficult period. PayPal surged thanks to lockdowns and pandemic-related restrictions in place for most of the year. It experienced record revenue and huge gains in total payments volume (TPV) and net new users.

However, PayPal , which carried over the momentum into the first half of 2021, started declining from June.  The company missed second-quarter earnings estimates, even though it still posted solid revenue and earnings growth. This was largely due to eBay transitioning to a new payment provider. In its latest quarter, the company fell short of revenue estimates but beat earnings estimates. While all the metrics were good, they were up against record performance in the third quarter of 2020.

However, Wall Street firm, Bernstein downgraded PayPal from buy to market performance after taking into account the slower growth trajectory. PayPal also faces increasing competition both from rivals like Block and other payment providers, as well as from the growing number of buy now, pay later (BNPL) companies. Rising inflation and the omicron variant also affected the economy, which in turn hit all payment providers. Investors also got scared when PayPal and other companies were investigated by the U.S. Justice Department for alleged financial incentives provided by Visa.

Should You Buy PYPL Shares?

Investors interested in PYPL shares should take a step back and consider the bigger picture and long-term outlook.  PayPal has massive scale as a result of being the pioneer of the digital-payments space for more than 20 years. The company currently has 383 million active individual accounts and 33 million active merchant accounts on its platform. During the third quarter, PayPal processed $310 billion in total payment volume, which is 26% year over year.

When it comes to innovation in this space, PayPal is widely recognized as the leading payments brand. It introduced an updated PayPal mobile app, with features like a full digital wallet, high-yield savings account, shopping deals and rewards, and bill pay, earlier in 2021. PayPal has also recently purchased Japanese buy now, pay later enterprise Paidy. This has extended the company’s reach to the world’s third-largest e-commerce market that still conducts 70% of purchases with cash. Its deal with Amazon will allow U.S. customers to use Venmo as a checkout option.

PayPal’s metrics look solid, despite missing Wall Street’s revenue estimates for two straight quarters. It has also been quite successful, generating a 21% free cash flow margin in Q3. Smart investors would thus buy PYPL shares and hold for the next year.

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