The seismic shift in consumer sentiment in the last 48 hours has investors showing interest in the beaten-down growth technology sector. One of the poster children for this group is PayPal Holdings Inc. (NASDAQ:PYPL), which is the PreMarket Prep Stock of the Day.
PayPal's Fall From Grace: Paypal made its all-time high in July at $310.16, which was just above its former all-time from last February ($309.14). By mid-October, it had already retreated to the $250 level, when the Street showed its strong disapproval for the potential takeover of Pinterest Inc. (NYSE:PINS).
Although the issue caught an initial bid on the first rumors of the deal, the more the Street analyzed it, the less they liked it. With that, coupled with other unfavorable market sentiments in the sector, PayPal retreated to the $175 area ahead of its fourth-quarter report.
PayPal's Q4 Miss, Lower Guidance: The last thing shareholders wanted out of the company was a fourth-quarter miss and that is exactly what happened. After the close on Feb. 1, the company reported quarterly earnings of $1.11 per share, which missed the analyst consensus estimate of $1.12. The company did manage a slight beat on sales, with $6.90 billion vs. a $6.86-billion estimate.
The company stunned the Street with lower projections for future growth. The CEO stated that eBay Inc. (NASDAQ:EBAY) put $1.4 billion of pressure on sales, and reduced sales growth by 700 basis points.
The following day, the issue swooned $43.23 or 25%, falling from $175.30 to $132.57 on heavy volume.
No Bounce For PayPal: After that shellacking, the issue never even saw that depressed closing price from Feb. 8.
On Wednesday, the issue posted a new low for the move at $100.60 and closed just above it at $100.72.
In Thursday’s slaughter off the open, the issue bottomed just below its opening print at $94.50 and rallied to end the session at $105.02.
PreMarket Prep's Take: When the issue was being covered on the show Friday, it was trading higher at the $106.50 area. Following Block Inc. (NYSE:SQ)'s fourth-quarter beat and subsequent rally, the hosts of the show were divided on the issue.
Co-host Dennis Dick was convinced the issue would have a sympathy move higher since it had already reported.
A possible trading setup in the issue was discussed on the PreMarket Prep Plus broadcast. Since the issue has established a double top from Wednesday ($105.55) and Thursday ($105.26), the issue had some room on the upside. It was stated that if the issue could hold the $105 area early in the session, a move higher may result.
Trading set-up discussed here:
PYPL Price Action: After a higher open, the issue retreated just under the aforementioned double top at $104.53 and began to move higher.
The stock ended Friday's session 5.64% higher at $110.94.
The discussion on the issue from Friday’s PreMarket Prep Plus broacast can be found here:
