PayPal earnings preview: Where next for PYPL stock?

When will PayPal release earnings?

Paypal will report its results after the closing bell on Tuesday, August 2^nd.

PayPal earnings expectations

According to Zack’s, analysts are expecting PayPal to report $0.85 in EPS on $6.76B in revenue.

PayPal earnings preview

In last quarter’s earnings report, PayPal succumbed to the deteriorating macroeconomic environment, cutting its guidance for the full 2022 year and halving its expectations for new account openings (to 10M) on the back of rising inflation, COVID lockdowns in China, and the war in Ukraine. Against that backdrop, traders will be keen for any additional updates to the company’s expected results for insight into whether management thinks the macroeconomic has stabilized and what it might mean for the firm moving forward.

One area of particular interest will in PayPal’s “buy now, pay later” business. The category has seen massive growth in recent years and is well-positioned to capitalize on the current higher-inflation regime as consumers seek to push off paying for purchases for as long as possible. Likewise, the peer-to-peer Venmo application has seen consistent growth (+2.4M new accounts last quarter) and will be a major factor in how traders interpret the company’s results.

Notably, analysts have been revising down their PayPal earnings estimates aggressively of late: in the last 90 days, the company has seen 37 downgrades in its EPS estimates and 0 upgrades! While bulls would obviously prefer the stocks they own to make more money, the impact of all these downgrades is already in the price, setting up a relatively low bar to clear for a better-than-expected earnings report.

Where next for PayPal’s stock price?

As the chart below shows, PayPal has been trending consistently lower beneath its 50-day EMA since Q3 of last year, with each rally to that area meeting selling pressure and stalling out. The stock did find support at its December 2017 lows around $68.50 at the end of last month, forming a small double bottom in the process. Prices have since rallied above their 50-day EMA for the first time this year, hinting that the long-term downtrend may be ending:

Source: StoneX, TradingView

In the wake of the earnings report, bulls will want to see a sustained break above the June highs near $89.00 to confirm that the established downtrend has ended and open the door for a recovery toward the mid-$90.00s or even back into the triple digits. Meanwhile, a bearish reversal back below the 50-day EMA would mean that the path of least resistance remains to the downside for a potential revisit of the multi-year lows under $70.00.

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