Stock Pinterest sell-PayPal buy or vice versa

02/05/2023

5 minutes read

2023.02.05 13:55

In the coming week, earnings and Fed Chair Powell will once more drive markets.
With optimistic earnings anticipated, Pinterest stock is a buy.
Given the dim outlook and weak results, PayPal shares are expected to fall.

Wall Street stocks fell on Friday as investors digested mixed megacap tech earnings and a blowout that rekindled concerns about the Federal Reserve’s future.

Nonetheless, the and ended the week on a positive note, with the tech-heavy Nasdaq recording its fifth consecutive week of winning, the longest such streak since late 2021.

The S&P 500 ended the week up 1.6%, the Nasdaq gained 3.3%, and the was the only exception, falling 0.2 percent.

The Federal Reserve Chairman Jerome is scheduled to take part in a discussion at the Economic Club of Washington on Tuesday at 12:40 p.m. Eastern Time (ET). This week is expected to be another busy one.

In the meantime, Walt Disney (NYSE:), the corporate earnings season continues. NASDAQ: Robinhood NASDAQ: Affirm NYSE: Uber, NASDAQ: Lyft, NYSE: Cloudflare, as well as Fortinet (NASDAQ:) everything on the agenda PepsiCo (NASDAQ:), among the other notable reporters, McDonald’s (NYSE:), NYSE: Chipotle, NYSE: Kellogg, NYSE: CVS Health, NYSE: BP, as well as Philip Morris

On the economic calendar, the U.S. report for January on Friday will be the most important, as investors anxiously await the next CPI inflation report on February 14.

Below, we highlight one stock that is likely to be in demand regardless of the direction the market takes, and another that may experience further downside.

Keep in mind, however, that our timetable is only for the upcoming week.

Pinterest to Buy

I anticipate Pinterest (NYSE:) to close just below a 52-week high on Friday. shares to outperform in the coming week because I believe the social media company’s most recent financial results will surprise to the upside because the fundamental outlook is improving.

On Monday, February 6, Pinterest is scheduled to announce its fourth-quarter earnings update after the U.S. market closes. With an implied swing of 13.1% in either direction, traders are pricing in a significant move for PINS stock following the report based on the options market.

Since Q4 2019, the image-sharing social media company has exceeded Wall Street’s expectations for its top line for 12 consecutive quarters, only twice falling short of profit estimates.

According to Investing.com, consensus estimates call for Q4 earnings of $0.27 per share, down 42.8% from EPS of $0.49 a year ago. Last week, the company announced that it would cut roughly 5% of its workforce in an effort to cut costs.

In the meantime, it is anticipated that revenue will rise by 4.8% to $887 million from last year. Due to its unique position in the social media, search, and shopping ecosystems, Pinterest stands to benefit from increasing budget allocations from advertisers. If that is indeed the case, it would mark Pinterest’s highest quarterly sales total on record.

Pinterest has seen businesses flock to its platform in spite of concerns about an industry-wide slowdown in digital ad spending as they seek to avoid the toxic and controversial content found on other social media networks like Facebook (NASDAQ:). NYSE: Snap, Twitter and TikTok.

Given the company’s improving fundamentals, stabilizing user growth trends, and expanding monetization potential under Bill Ready’s leadership, I believe that the company will provide positive guidance for the current quarter. The social media company’s turnaround efforts have already made progress under the direction of the former Google e-commerce executive, who took over for Ben Silbermann, the company’s founding CEO, last year.

On Thursday, PINS stock reached a new 52-week high of $29.17, a level not seen since February 2, 2022. It fell on Friday to close the week at $27.48, giving it a $18.6 billion valuation.

After the brutal selloff that occurred last year, shares have surged back in the early part of 2023, gaining 13.2% so far this year. The stock is still about 70% away from its all-time high of $89.90, reached in February 2021, despite its recent turnaround.

PayPal to Sell

PayPal shares (NASDAQ:) will underperform in the coming week as investors prepare for a disappointing digital payments provider’s earnings report.

After the closing bell on Thursday, February 9, PayPal’s financial results for the fourth quarter are due. These results are likely to be impacted once more by a slowdown in its core e-commerce business as a result of a combination of unfavorable consumer spending and customer demand trends and rising competition in the mobile payments processing industry.

Following the update, traders are pricing in a possible implied move of 9.3% in either direction for PayPal’s shares based on movements in the options market.

According to a survey, it should come as no surprise that in the 90 days preceding the earnings report, analysts have reduced their EPS estimates by 16.5 percent.

The digital payment processing company is expected to report earnings of $1.20 per share, up 8.1% from EPS of $1.11 last year. Meanwhile, revenue is anticipated to increase by 6.8% to $7.39 billion from the previous year.

In keeping with PayPal’s previous commitment to reduce costs, the San Jose, California-based company announced last month that it would lay off 7% of its workforce, or roughly 2,000 employees.

Due to the challenging operating environment and slowing e-commerce trends, I believe PayPal’s management will be prudent in its guidance for the coming year, despite the year-over-year improvement on both the top and bottom lines.

Additionally, I believe that Apple’s (NASDAQ:) growing popularity PayPal’s growth will be hampered in the near future by Apple Pay and Block’s Cash App, which make it more susceptible to losing market share in the online payments industry.

In addition, the company faces fundamental uncertainty as a result of recent news that a number of major banks, including JP Morgan Chase (NYSE:), NYSE: Bank of America, as well as Wells Fargo (NYSE:), are collaborating to launch their own digital wallet by the second half of 2023, which will allow customers to shop online.

On Friday, PYPL stock closed at $85.52, up from a bear market low of $66.39 at the end of December. The fintech giant with its headquarters in San Jose, California, has a market capitalization of $97.5 billion at the moment.

Through the first five weeks of 2023, shares, which have rallied to begin the year along with the tech-heavy Nasdaq, are up a whopping 20%. Despite the recent turnaround, the stock is still 72% away from its all-time high of $310.16 in July 2021.

Disclosure: Through the ProShares Short S&P 500 ETF (SH) and ProShares Short QQQ ETF (PSQ), I am short on the S&P 500 and Nasdaq 100 at the time of writing. Based on my ongoing risk assessment of the macroeconomic environment and the financials of companies, I regularly rebalance my portfolio of individual stocks and ETFs. This article’s opinions are solely the author’s and should not be interpreted as investment advice.