The run-up in fintech and lending firms in the last three months risks coming to an end. In the last few weeks, PayPal (PYPL) slumped from $63 to $60. Two analysts downgraded the stock in the last week.
BTIG lowered its buy rating on PYPL stock to neutral. It cited too much business uncertainty and a longer road ahead for achieving profitability as the basis of the downgrade. Impatient shareholders may sell the stock if profit growth does not arrive this fiscal year.
PayPal’s new leadership under CEO Alex Chriss is a positive development.
As the leader in the fintech space, a drop in PYPL stock would hurt Nuvei (NVEI) and Block (SQ). Global Payments (PYPL) would outperform because has strong profitability and growth. Online lenders have higher risks. Tight credit conditions would hurt Upstart (UPST), whose shares peaked at around $47. Affirm (AFRM), which peaked at over $50, could fall. Short sellers are betting against the buy now, pay later business model. They have an 18.7% short interest against AFRM stock.
Shift4 Payments (FOUR) may fall, validating the short interest of 18.63%. Speculators bought the stock last month in hopes that the company would find a buyer who would pay between $90 - $100 a share.
