PayPal fell almost 14% after-hours Thursday but is down just slightly on Friday. Here’s the level it must hold as its valuation becomes tempting.
PayPal (PYPL) – Get PayPal Holdings Inc. Report stock is down about 3% on Friday morning, better than what investors saw last night after the payment-tech company reported earnings.
At its after-hours low, PayPal stock was down almost 14%. That came despite PayPal reporting an estimate-beating quarter.
Third-quarter earnings of $1.08 a share beat analysts’ expectations by 12 cents a share, while revenue grew almost 11% year over year to $6.85 billion and also beat consensus expectations.
Further, management raised its full-year profit guidance, to a range of $4.07 to $4.09 a share from a range of $3.87 to $3.97 a share. Consensus expectations stood at $3.93 a share going into the report.
Next year, management expects earnings growth of at least 15%.
PayPal is even adding Apple’s (AAPL) – Get Apple Inc. Report Apple Pay to its lineup.
Here’s where we run into trouble.
Management guided for full-year revenue of $27.53 billion vs. a prior outlook of $27.85 billion and consensus estimate of $27.87 billion.
To recap, we have a top- and bottom-line beat, better-than-expected earnings guidance and strong earnings guidance for FY 2023. The only hangup is a $500 million shortfall in revenue.
For a stock that was trading at just 16 times this year’s earnings in last night’s after-hours wipeout and just 14 times estimates for 2023, at what point is enough enough?
Trading PayPal Stock on Earnings
Monthly chart of PayPal stock.
Chart courtesy of TrendSpider.com
I looked at both the daily and the weekly charts, and nothing stood out prominently.
Simply put, PayPal stock has a broken chart.
Not many levels of support are left to consider, and the shares clearly are in a near free-fall state.
But support does come in, around the $67 area.
Expanding that a bit, the $66 to $70 area was support in 2017, 2018 and most recently in June and July of this year. It was also support in last night’s after-hour session.
Put simply, it’s very key support. If this area fails, there’s no telling where the next level of support comes into play. Maybe it’s in the mid-$50s. Perhaps at $50 exactly.
While $42.50 was a major breakout level, it’s hard to imagine a scenario where PayPal stock falls another 40%-plus from current levels.
On the upside, let’s see if the shares can regain $75. If it can do that, the covid low near $82 is back in play, followed by the $87 to $90 zone.