PayPal stock price has suffered a big reversal this year as concerns about its growth trajectory returned. After rising to $93.67 in December, the PYPL share price has collapsed by over 27% to trade at $67.9. It is hovering at the lowest swing since September last year, a situation that may get worse now that it has formed a death cross pattern.
PayPal stock price analysis
The daily chart shows that the PYPL share price peaked at $93.67 in December last year, where it formed a double-top pattern. This pattern is characterized by twin peaks and a neckline, which, in this case, was at $81.7.
The stock has now formed a death cross pattern as the 200-day and 50-day Weighted Moving Averages (EMA) crossed each other. This pattern is often seen as the riskiest signs in the market.
PYPL shares have moved to the 61.8% Fibonacci Retracement level, forming a bearish pennant pattern. A long vertical line and a symmetrical triangle pattern characterize a pennant.
The stock has moved below the strong, pivot, reverse point of the Murrey Math Lines tool, while the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have all pointed downwards.
Therefore, the path of the least resistance for the PYPL stock price is bearish, with the next point to watch being at $60, which coincides with the 78.6% Fibonacci Retracement point. This view will become validated if the stock plunges below the 61.8% retracement point at $67.
On the flip side, a move above the key resistance level at $72 will invalidate the bearish outlook as it will signal that there are more buyers in the market.
PYPL stock chart by TradingView
Why PayPal share price is crashing
There are several reasons why the PYPL stock price is crashing. First, there are concerns that PayPal USD (PYUSD), its hyped stablecoin, is not doing well. The stablecoin’s market cap remains at $705 million, much lower than last year’s high of over $1 billion.
PayPal hoped that the stablecoin would make it a more successful brand like Tether, which is minting billions of dollars each quarter.
Second, there are signs that PayPal’s business is no longer growing as it did in the past when it was one of the top-performing fintech companies. The most recent financial results showed that the number of active accounts remained at 434 million in the fourth quarter. Monthly active accounts rose by just 2% to 229 million, while payment transactions dropped slightly.
This performance is primarily because the payment industry has continued being highly competitive. Customers today have choices of more payment solutions to use, including Cash App and Coinbase. Stablecoin transaction volume has grown substantially in the past few months.
Read more: PayPal is no longer the world’s largest payment network: here’s who beat it in 2024
PayPal’s unbranded solution, which includes its payment processing business is competing with popular names like Klarna, Stripe, and GoCardless.
Analysts anticipate that PayPal’s growth will remain under pressure in the coming years even as the payment industry booms. The average estimate is that its quarterly revenue will grow by just 1.86% to $7.8 billion, bringing the annual figure to $33 billion. It will be followed by a 6.74% annual increase to $35 billion next year.
Read more: How PayPal plans to boost Venmo revenue to $2 billion by 2027
Additionally, the company was hit by the Honey scam, in which it was accused of scamming many creators.
PYPL stock is a bargain
On the positive side, PayPal has become a less overvalued company than it was before. It has a trailing twelve months (TTM) price-to-earnings ratio of 17 and a forward multiple of 13. These are cheaper valuations compared to the S&P 500 index’s average of 21.
This valuation is a sign that investors no longer see PayPal as a growth company. Instead, they now see it as a value company that will have slow growth in the future.
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