Shares of PayPal Holdings, Inc. (PYPL) jumped more than 2.5% in early trading as the stock looks to break out to fresh all-time highs. Bernstein upgraded the stock to Outperform with a $61.00 price target, while KeyBanc initiated coverage with an Overweight rating and $60.00 price target. With the stock trading at around $55.00, these analyst price targets represent premiums of 9% to 10% over the current market price.
During the first quarter, PayPal reported revenue that increased 17.3% to $2.98 billion – beating consensus estimates by $40 million – while earnings per share of 44 cents beat consensus estimates by three cents. In addition to reporting results that surpassed the market's expectations, the company's long-term prospects remain bullish, but there have been some concerns over margin pressure from partnerships and growing competition. (See also: PayPal Could Add to Gains Ahead of Earnings.)
From a technical standpoint, the stock is poised to break out from an ascending triangle chart pattern to fresh highs. The key level to watch is the prior high and R1 resistance at $55.60 that form the top of the chart pattern. The relative strength index (RSI) stands at a moderate 61.21 despite the strong uptrend, while the moving average convergence divergence (MACD) could see a bullish crossover in the near term.
Traders should watch for a breakout to R2 resistance at $57.25 or for more consolidation between trendline resistance at $55.60 and the pivot point at $53.21. If a breakout occurs, traders should watch for some consolidation above the new trendline support before a further trend higher, since the stock is already starting to approach overbought levels. A breakdown from the pivot point could mean a fall to the 50-day moving average at $51.68. (For additional reading, check out: How Safe Is Venmo, and Why Is It Free?)
Charts courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.