Trading Strategies For PayPal Stock Before And After Q1 Earnings

Zinger Key Points
  • Analysts expect the company to report EPS of $1.10 on revenues of $6.98 billion for the first quarter.
  • PayPal broke up from a triangle pattern Monday but may have formed a bearish double top.

PayPal Holdings, Inc PYPL gapped up slightly to start Monday’s trading session and was rising about 1.4% intraday. The company is set to print its first-quarter financial results after the markets close.

Analysts expect the company to report EPS of $1.10 on revenues of $6.98 billion for the quarter ending March 31.

On April 19, Mizuho analyst Dan Dolev maintained a Buy rating on PayPal and cut the price target from $100 to $92. The new price target suggests 23% upside for the stock. Oppenheimer analyst Ari Wald maintained an Outperform rating on the stock and dropped the price target from $90 to $89. The price targets suggest about 18% upside for PayPal.

When PayPal printed its fourth-quarter earnings report on Feb. 9, the stock rallied about 3% the following day before continuing in its downtrend, which brought PayPal to a March 13 low of $71.09.

For that quarter, PayPal reported earnings per share of $1.24, beating a Street estimate of $1.20 per share. The company posted a top-line miss, reporting revenues of $7.38 billion compared to the $7.39-billion consensus estimate.

From a technical perspective, PayPal looks mixed heading into the event, having broken bullishly from a triangle pattern but the stock also formed a double top pattern. Of course, holding a position in a stock over earnings can be akin to gambling, as stocks can rise following an earnings miss and fall after reporting a beat.

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The PayPal Chart: PayPal had been trading in a triangle pattern since April 26 from which the stock gapped higher on Monday. At the high-of-day, PayPal ran into resistance at the May 1 high of $76.50 and rejected the level, which caused a bearish double top pattern to form.

  • If PayPal receives a bullish reaction to its earnings print and rises above that level, the double top will negate and an uptrend will confirm. If the stock receives a bearish reaction to the print, PayPal may fall back under the upper descending trend line of the triangle, which could continue to push the stock lower into a downtrend.
  • On Monday, PayPal was working to print a doji candlestick, which could indicate the local top has occurred. If PayPal trades sideways or just slightly lower on Tuesday, bullish traders would like to see the stock hold above the top of the triangle pattern.
  • PayPal has resistance above at $77.36 and $82.07 and support below at $73.27 and $68.71.

Photo via Shutterstock. 

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