PayPal stock price has continued to underperform the broader market and the fintech category. It has barely moved this year even as the main indices like the S&P 500 and Nasdaq 100 indices have surged to their record highs. It is still down by over 13% in the past 12 months.
Slow growth and low margins
PayPal share price has struggled as the company faces a mountain of headwinds in its key industries. It is struggling as competition in the payment industry jumps. Many people in the US are now using apps like Cash App to send money.
Further, the trend towards Buy Now Pay Later (BNPL) is growing as many companies like Affirm and AfterPay take market share. This is important because PayPal is a major payment platform in the US and so, it is losing market share.
Most important, its unbranded solutions, which include Braintree, are facing robust competition from the likes of Apple Pay and Google Pay.
The implication of all this is that PayPal is no longer the growth machine it was a few years ago. In fact, the number of PayPal active users has been slowing in the past few months. This is a shame for a company that used to grow by double-digits.
PayPal’s profitability has also been affected as its margins have retreated. For example, the company’s gross profit margin stands at 39.60%, down from its five-year average of 44.70%. The sector median stands at 59.30%.
PayPal’s EBITDA margin of 18.30% is lower than the sector median of 21.64% and the five-year average of 19%. Net income margin of 14.2% is also lower than what other similar companies get.
Therefore, there are concerns that the company is not moving in the right direction and that its turnaround strategy is not working well.
Read more: How to buy crypto with PayPal.
PayPal stock price forecast
The daily chart shows that the PYPL share price has been in a tight range in the past few days. A closer look shows that it has bounced back and forth at the 200-day moving average. Its attempts to move above this MA have failed recently.
The MACD indicator has moved above the neutral point. Also, the stock has formed a triangle pattern. Therefore, the outlook for the stock is neutral. A clear move above the upper side of the triangle and the 200-day EMA will confirm a bullish breakout. If this happens, the next level to watch will be at $76.52, its highest point on July 31st.
The alternative scenario is where the PayPal stock price makes a bearish breakout as sellers target the key psychological point at $50.
