PayPal Shares Show Signs of Life After Prolonged Downturn

After enduring seven consecutive days of losses, PayPal shares staged a remarkable comeback on Friday, surging more than four percent amid unusually heavy trading activity. This sudden upward movement, marked by trading volume that exploded to over 20 million shares—67% above the daily average—provided a glimmer of hope for investors. However, despite the encouraging technical picture, market analysts continue to express caution about the payment company's near-term prospects.

The catalyst for Friday's rally appears to be PayPal's impressive third-quarter earnings report. The company delivered results that handily exceeded analyst projections on multiple fronts. Earnings per share came in at $1.34, significantly surpassing the consensus estimate of $1.20. Revenue performance was equally strong, reaching $8.42 billion against expectations of $8.21 billion, representing a 7.3% year-over-year increase.

Bolstered by these results, management raised its full-year EPS guidance to a range between $5.35 and $5.39, up from the previous forecast of $5.15 to $5.30. This revised outlook implies annual growth of 15 to 16 percent.

Technical Indicators Present Mixed Signals

From a chart perspective, PayPal's recent price action demonstrates a classic bullish reversal pattern. Following Thursday's setback, Friday's powerful rebound more than recovered the prior session's losses. Several technical developments suggest potential for further near-term gains:

• A "Golden Cross" has formed with the 10-day moving average crossing above the 50-day moving average
• Support levels are established around $58 and $60
• Resistance awaits near the $61 and $63 price points

Nevertheless, cautionary signals remain. The Relative Strength Index (RSI) has reached approximately 70, entering overbought territory that could trigger a temporary pause or minor pullback in the coming sessions.

Should investors sell immediately? Or is it worth buying PayPal?

Analyst Community Maintains Cautious Stance

While technical indicators show improvement, professional analysts remain largely unconvinced. Among the 37 analysts covering PayPal, only 15 currently recommend buying the shares. The majority maintain neutral positions, with 18 advising investors to hold and four recommending selling. The consensus recommendation thus remains neutral.

Recent analyst actions reveal a notable trend: several prominent investment banks have reduced their price targets. Sanford C. Bernstein lowered its target from $85 to $76, while KGI Securities trimmed its projection from $85 to $80. In a contrasting move, Keefe, Bruyette & Woods displayed more optimism by raising its target from $85 to $90.

The average price target among all analysts stands just below $83, suggesting substantial potential upside from current levels. However, the prevailing skepticism indicates persistent concerns about PayPal's business model challenges.

Strategic Initiatives Show Forward Momentum

Beyond quarterly results, PayPal continues to advance its strategic expansion efforts. The company renewed its partnership with KKR for European "Buy Now, Pay Later" financing, establishing a facility worth up to €6 billion. Additionally, PayPal launched its interest-free installment payment service "Pay in 4" in the Canadian market, extending the product's geographic reach.

The Critical Challenge: Sustaining the Recovery

The fundamental question for investors is whether Friday's rebound represents a genuine turning point or merely a temporary respite in a longer downtrend. Seven consecutive losing sessions reflected deep-seated market anxieties, particularly regarding growth in PayPal's core checkout business.

While the strong fundamentals, increased trading volume, and constructive chart formation provide reasons for optimism, establishing a sustainable upward trend will require PayPal to overcome key technical resistance levels in the coming weeks and ultimately win over skeptical analysts. The battle for a definitive trend reversal appears far from decided.