PayPal Holdings Inc. (PYPL) reports Q3 2021 earnings after Monday’s closing bell, with analysts looking for a profit of $1.08 per-share on $6.24 billion in revenue. If met, earnings-per-share (EPS) will mark zero growth compared to the same quarter in 2020 when the pandemic forced holdouts to make the switch to electronic transactions. The stock fell more than 6% in July after lowering Q3 guidance and has relinquished another 20% of its value into November.
Unwinding the COVID Trade
The COVID bid has been coming out of PayPal for months, contributing to a 4% year-to-date loss following 2020’s historic 216% return. It’s now trading below the 200-day moving average for the first time since March 2020’s pandemic decline, highlighting a fall from grace in line with the long-held observation that leaders in one year become the next year’s laggards. Unfortunately for shareholders, long-term relative strength readings still haven’t hit oversold levels, despite an 85-point decline since July.
Even so, the future is bright for PayPal, which rallied in late October after announcing it would not pursue an acquisition of Pinterest Inc. (PINS). Shareholders expressed their opinion by selling the stock aggressively when the rumor hit the newswires, concerned the transaction would dilute PYPL’s razor-sharp focus on direct financial transactions. It’s likely the freefall contributed to the company’s subsequent decision to walk away from the bargaining table.
Wall Street and Technical Outlook
Wall Street consensus dropped like a rock after weak July guidance, now standing at an ‘Overweight’ rating based upon 25 ‘Buy’, 4 ‘Overweight’, and 4 ‘Hold’ recommendations. In addition, two analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $200 to a Street-high $380 while the stock is set to open Monday’s session nearly $100 below the median $325 target.
PayPal broke out above the 2019 high at 121.48 in May 2020, entering a powerful uptrend that stalled at 212 in September. It cleared that barrier in December, reversing near 310 in February 2021 and dropping to 223. A failed July breakout attempt reinforced resistance while the subsequent decline is now testing range support. Bulls hold a modest advantage heading into the report because weekly relative strength readings are highly oversold, favoring an intermediate bounce.
For a look at today’s economic events, check out our earnings calendar.
Disclosure: the author held no positions in aforementioned securities at the time of publication.
This article was originally posted on FX Empire
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