Analyst: Keep an Eye on PayPal Stock Before Earnings

PayPal will report earnings on Thursday, Feb. 9

Deputy Editor
Feb 6, 2023 at 9:16 AM
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PayPal Holdings Inc (NASDAQ:PYPL) is 2.4% at $83.51 lower premarket, following a bear note from Raymond James.

The analyst downgraded shares of the payments company to "market perform" from "outperform," citing a cautious stance ahead of PayPal's fourth-quarter earnings report, due out after the close on Thursday, Feb. 9. In addition, Morgan Stanley cut its target price to $133 from $136. 

On the charts, PayPal stock is starting 2023 with strong returns, already up 20.1% year-to-date. Today's dip, should it hold, threatens to push PYPL back below recently reclaimed support at its 140-day moving average.

Coming into today, analyst sentiment was optimistic, with 24 of 32 in coverage sporting a "buy" or better rating, and not a single "sell" on the books. What's more, the equity's average 12-month target price of $103.38 is an elevated 23.6% premium to Friday's close. This leaves room for more downgrades and/or price-target cuts, should earnings disappoint. 

PayPal stock has a mixed history of post-earnings price action. Following its last eight reports, the equity moved lower four times, including a 1.8% drop in November. Regardless of direction, the shares averaged a 9.1% swing over the last two years, and the options pits are pricing in a slightly higher 10.2% move this time around.

An unwinding of optimism could also weigh on the shares, as options traders have been betting more bullishly in recent weeks. This is per the security's 10-day call/put volume ratio of 3.05 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 96th percentile of its annual range.


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