PayPal stock price is sending mixed signals ahead of its second-quarter earnings on Tuesday. PYPL shares were trading at $78.2 on Monday, its highest swing since February, and 40% above its lowest level this year.
PayPal Stock Price is Sending Mixed Signals
The daily chart shows that the PYPL stock price has been in a strong uptrend, mirroring the performance of other American equities. On the positive side, it has formed a golden cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other.
On the negative side, the PayPal stock price has formed a rising wedge, a popular bearish reversal sign. This pattern comprises two ascending and converging trendlines, with a breakdown happening when they near their crossover.
The other negative is that the Average Directional Index (ADX) has continued falling, a sign that the bullish momentum is losing steam.
Therefore, the most likely scenario is where the PayPal share price crashes after earnings. If this happens, the key level to watch will be at the 50-day moving average at $73.
PYPL stock chart | Source: TradingView
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PayPal is in Trouble Despite Pay With Crypto Launch
The second-quarter earnings come at a time when PayPal’s business is facing substantial challenges. Wall Street analysts expect its results to show that its revenue rose by just 2.4% in Q2, while its earnings per share rose from $1.19 to $1.3.
The annual estimate is that its revenue will be $32.68 billion, up by 2.76% from last year. These numbers are much lower than those of traditional fintech companies. For example, analysts expect that Visa’s Q2 revenue will be $9.8 billion, a 10.6% from a year earlier.
PayPal’s main challenge is that stablecoins will ultimately go mainstream and be used to handle daily transactions. Indeed, Visa data show that there are now over 281 million stablecoin addresses and annual transactions exceeding $7.8 trillion.
This stablecoin growth implies that PayPal will have to reduce its hefty fees. Its fees page shows that PayPal charges at least 2.99% plus a fixed payment for all its transactions. These are hefty fees, as a $10,000 transaction costs about $300.
In contrast, a similar transaction using stablecoins costs almost nothing. Therefore, companies will likely ultimately embrace crypto over time. Indeed, retailers like Walmart and Amazon are studying ways to incorporate stablecoins into their operations.
Even when they choose PayPal’s Pay with Crypto, the company will make less money per transaction. This explains why the stock remained in a tight range after the announcement. The company said:
“With a transaction rate of 0.99%, Pay with Crypto decreases the cost of transactions by up to 90% when compared to international credit card processing.”
PayPal stock has just two benefits. First, the management is working to reduce the number of outstanding shares. It now has 979 million in outstanding shares, down from over 1.17 billion in 2021.
Second, the company has become cheap, with a price-to-earnings ratio of 17.5, much lower than the year-to-date high of 23.3 and the S&P 500 average of 24.
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