Upgraded PayPal Stock Runs Into Technical Resistance

Most brokerages waxed optimistic on PayPal's growth opportunity

May 25, 2018 at 10:23 AM
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Bullish analysts are chiming in on PayPal Holdings Inc (NASDAQ:PYPL), after the payments processor raised its three-to-five year revenue guidance at yesterday's annual investor day. This morning, Stifel upgraded PYPL stock to "buy" from "hold," and boosted its price target to $99 from $82 -- a more than 21% premium to last night's close at $81.55. The brokerage firm noted PayPal's growth creates "an expanding value proposition for both merchants and consumers," and said its total market opportunity is roughly $110 trillion.

Several other brokerage firms echoed the company's growth prospects. Cantor Fitzgerald, for instance, raised its PYPL price target to $93 from $85 -- waxing optimistic over PayPal's expansion of its products and functionality, including partnerships with Google Pay and Facebook. Deutsche Bank, meanwhile, raised its full-year earnings per share forecast.

Although PYPL stock initially rose higher on the upbeat analyst attention, it's since swung 0.7% lower to trade at $81.05 -- just below its 10% year-to-date breakeven mark -- after running into familiar resistance in the $82-$83 region. This area is home to a 23.6% Fibonacci retracement of PayPal's rally from its December lows to its late-January record high of $86.32, as well as its mid-March closing high.

Most analysts are already bullish on PYPL, and options traders are optimistic, too. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.52 ranks below 99% of all comparable readings in the past year, meaning short-term speculators have rarely been more call-skewed.

Peak front-month open interest is found at the June 80 and 85 calls, where more than 37,000 contracts collectively reside. Data from the major options exchanges confirms buy-to-open activity at each strike, as traders bet on PYPL stock breaking out above short-term technical resistance over the next several weeks.


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