Posted on April 16th, 2018
PayPal Holdings Inc. (PYPL) shares have soared over the past two years climbing by 113.5 percent since the end of 2015. However, during the fourth-quarter of 2017 institutions and hedge funds were aggressively reducing their stakes in the online payment processor. Shares of the stock have climbed by only five percent so far in 2018, about five percentage point better than the S&P 500.
PayPal was added to the WhaleWisdom WhaleIndex Portfolio on February 16, 2016 and has been among one of the best performers in the WhaleIndex. However, eBay Inc. (EBAY) recently announced PayPal would no longer be its main payment processor starting in 2020, and that caused shares of PayPal to plunge 10 percent off its all-time highs.
Institutions Dump Shares
During the fourth quarter, 237 new institutions started new positions, while 415 added to existing positions. However, only 55 institutions closed out their position entirely, 508 institutions reduced their holdings. In fact, the total number of aggregate 13F shares on December 31, fell by 1.35 percent to 970.97 million shares from 984.26 million at the end of the third quarter.
Analyst Remain Bullish
Institutions reducing their stakes comes as a surprise because analysts have remained extremely bullish. In fact, the average analysts price target on the stock is currently $84.85, according to Ycharts, nearly 10 percent higher than the stock’s current price of $77.27. Analysts have also been upping their earnings estimates for 2018 slightly climbing to $2.29 from $2.26 per share, an increase of 1.3 percent, while trimming revenue estimates slightly to $15.24 billion, down from $15.36 billion, a decline about 1 percent.
Technically, the shares of PayPal look weak and have been trending lower since peaking in mid-January. The stock has broken a multi-month uptrend that has been in place since June of 2016. With that uptrend now broken, shares are at risk of falling even further, and it may be a sign that institutional selling is continuing to take place.
The company is expected to report results on April 26, and analysts are looking for earnings to climb by 22.5 percent to $0.54 per share, while revenue is seen climbing by 20.6 percent to $3.589 billion when it reports first-quarter results.
It will be interesting to see how the upcoming quarterly results turn out and whether it will be the analysts or the institutions that got PayPal right. As of right now, one thing is clear, the analysts are bulls, while the institutions are the bears. However, that may all change by the end of April.