PayPal Holdings Inc’s Stock Chart Points to Potential Doubling

Contrarian Investors Might Want to Consider PYPL Stock

In 2020, the COVID-19 pandemic led to a significant increase in e-commerce activity and, in turn, demand for digital payments. The end result was a massive run-up in the price of digital payment stocks. But now, with the threat of COVID-19 fading ad the brick-and-mortar economy reopening, digital payment stocks have been losing steam and selling off.

Take the case of PayPal Holdings Inc (NASDAQ:PYPL), a major global provider of digital payment solutions.

The excessive run-up in PayPal stock to $310.16 on July 7, 2021—and investors’ fears about the demand for PayPal Holdings Inc’s solutions decreasing—have led to a significant retrenchment that has driven the stock down by 67% from its high.

PYPL stock traded down to a 52-week low of $94.50 on February 24 prior to staging an oversold rally.

One concern for investors is the slowing of PayPal Holdings Inc’s revenue growth rate, which at 14% and 17% for 2021 and 2022, respectively, is still decent and comparable to the market leaders, Mastercard Inc (NYSE:MA) and Visa Inc (NYSE:V).

While the slower revenue growth does justify a repricing of PayPal stock, I don’t agree with the degree of the selling, and I feel there’s an opportunity for longer-term investors.

PYPL Stock Represents Contrarian Opportunity for Patient Investors

PayPal Holdings Inc’s five-year stock chart below shows a strong rally from April 2017 to an initial breakout in January 2019. PayPal stock moved up to about $120.00 in early 2020 but failed to hold, subsequently declining to the previous resistance level.

PYPL stock managed to hold this key level and subsequently took another significant upward move from April 2020 to its high in July 2021.

Shares of PayPal Holdings Inc faced several failed breakouts above $310.00 and subsequently broke down after the 50-day moving average broke below the 200-day moving average, in what is known as a death cross pattern.

Chart courtesy of StockCharts.com 

The horizontal Fibonacci retracement lines on the above five-year PayPal stock chart point to significant upside potential.

If shares of PayPal Holdings Inc can hold multi-year support around $85.00–$90.00, look for it to target the first Fibonacci target around $142.00, followed by $178.00 and $207.00. This would translate to potential gains from PYPL stock of 38%, 73%, and 100%.

Chart courtesy of StockCharts.com 

The subsequent selling of PayPal stock has been rapid and excessive to the point where the stock is currently technically oversold, which implies that buying could emerge.

Moreover, PayPal Holdings Inc’s moving average convergence/divergence (MACD) appears to be reversing after flashing a “buy” signal.

This, along with its oversold condition, could drive PYPL stock to mount a rally.

Analyst Take

Shares of PayPal Holdings Inc look compelling after the major selling. For contrarian investors, the risk/reward trade-off is attractive.

Based on its chart patterns, PayPal stock has roughly $10.00 to $15.00 of downside and $39.00 to $104.00 of upside.