PayPal Stock Price Pressured as the PYUSD Supply Drops By 30%

Key Insights

• PayPal stock has retreated in the past few months.
• The PYUSD stablecoin supply has dropped by 30% from its all-time high.
• Analysts believe that the company’s growth will stagnate as competition rises.

PayPal stock price has been one of the top laggards in Wall Street in the past few years. After soaring to $300 during the pandemic, PYPL has slumped to $42.50. This retreat may continue as its stablecoin business falters, with the PayPal USD (PYUSD) supply falling.

PayPal Stock at Risk as PYUSD Supply Falls

PayPal, a top fintech company, has established itself as one of the top players in the stablecoin industry. It launched the PYUSD stablecoin a few years ago. This move was meant to take advantage of one of the fastest-growing areas in finance.

There are signs that PYUSD’s growth has faltered. CoinMarketCap data shows that the market cap of all PYUSD tokens in circulation has dropped by 30% from its highest point. It now has a supply of $2.74 billion, down sharply from the year-to-date high of $4.2 billion.

The same is happening in terms of its usage. Artemis data shows that the daily transfer volume has also dropped, a sign that its usage has deteriorated. Its volume dropped to $133 million on June 16 from a high of $5.2 billion at its peak last year.

The data also shows that the number of PYUSD users has continued falling this year and now stands at just 3.7k. At its peak in December last year, the coin had over 25k users.

These numbers are a major disappointment for PayPal, which entered the industry to compete with the likes of Circle and Tether.

If all went well, its stablecoin business would have become one of its highest-margin ones. That’s because of how the business works. Stablecoin issuers like PayPal and Tether make money by investing the funds in short-term government bonds and keeping the interest.

As such, the company only incurs marketing costs. In some cases, especially with Circle, it also pays Coinbase for having it on its platform. With interest rates at around 4% today, PayPal’s PYUSD stablecoin will make it over $107 million in annual revenue.

PayPal’s Growth Has Stagnated

PayPal’s other businesses, including its branded and non-branded solutions, have faced major challenges. Its branded checkout business is made up of PayPal Checkout, Venmo Checkout, and its BNPL solutions. This business is facing competition from companies like Google, Amazon, and Apple.

The company’s unbranded business, mostly made up of its Braintree solution, is facing competition from companies like Square and Stripe.

All this is demonstrated in its revenues and forward guidance. Yahoo Finance data shows that its annual revenue is expected to grow by just 3.50% this year to $34.3 billion. It is expected to grow by single digits in the coming years.

As a result, analysts expect that the company will become a buyout candidate in the future. Besides, it has become a highly undervalued company, with its forward price-to-earnings ratio being just 8.

This simply means that a potential acquirer, such as Stripe, would take about 8 years to recoup its investment. They would assume that the growth has stalled.

PayPal Stock Price Technical Analysis

The weekly chart shows that the PYPL stock price has plunged in the past few months. It is now hovering around its lowest level in years. It has remained below the key support level of $50, its lowest point in 2023 and February this year.

The stock has plunged below all moving averages. Also, the MACD indicator has remained below the zero line. Therefore, unless a buyout offer happens, chances are that the stock will likely continue falling.

It could potentially fall to the key support level at $35. This outlook will be confirmed if it falls below the key support level of $40.

The post PayPal Stock Price Pressured as the PYUSD Supply Drops By 30% appeared first on The Market Periodical.