Paypal Technical Analysis and Enterprise Value PDF

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Paypal Technical Analysis and Enterprise Value...

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I.

Introduction PayPal is a technology platform in which digital and mobile payments can be made by consumers, merchants, friends and family. PayPal’s business operates in the financial sector with the company’s corporate office located in San Jose, California. The purpose of this report is to conduct a technical analysis on the PayPal. A technical analysis is conducted to analyze graphs centered around stock data for a company. The technical analysis can consist of numerous indicators which can help determine whether or not the stock is safe to invest in, or if current stock holders need to sell their stocks in order to save their already invested funds. This report will analyze the Standard Deviation, the Simple Moving Average and Exponential Moving Average, Money Flow Index, Bollinger Bands, Moving Average Convergence/Divergence Oscillator, and Relative Strength Index. These common indicators will analysis the stock prices of PayPal determining whether or not it is safe for investors to invest or sell their stocks in the company.

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Analysis Section Standard Deviation The standard deviation is the amount of variability or dispersion around an average, also a measure of volatility (Stock Charts, 2018). The dispersion is the difference between the actual value and the average value, when analyzing the data, the larger variability between the actual value and the average value of the data leads to a higher standard deviation, but when the variability is smaller, the standard deviation is lower. With this information, analysts and investors will be able to measure and analyze both the expected risk and the price movements of the stock. The chart below provided by Stock Charts,

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analyzes the PayPal’s Standard Deviation on a daily basis from May 14, 2018 to November 2, 2018. When analyzing the chart, it is easy to see, during the 180-day range, the Standard Deviation ranged from 1.38 to 4.40. This means, the average price changes of the PayPal stocks would range from $1.38 to $4.40. For any price movements of the PayPal stocks, if the price were to move higher, or lower, than one standard deviation ($1.97), depending on which way it moved, it would show an above average move whether it be strong or weak. The standard deviation appeared to fluctuate throughout the period that is captured in the chart below, on June 25, 2018 it was 0.65, on August 2, 2018 it was 3.33 the dipping to 0.79 on September 27, 2018 and reaching it highest at 4.44 on October 11, 2018, and recently at 1.97 as of November 2, 2018. Noticeably when the standard deviation was higher the stock price tending to be lesser.

(Stock Charts, PayPal Standard Deviation, 2018)

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Simple Moving Average (SMA) and Exponential Moving Average (EMA) The two most popular moving averages are the Simple Moving Average (SMA) and Exponential Moving Average (EMA). SMA of stock data is the average of the closing prices of the stock (Stock Charts, 2018). This can be calculated by adding the closing prices of a certain number of periods, divided by the total number of periods for the analysis. When analyzing the SMA, it is easy to see the stock trend, if the SMA is moving up, then the stock price is increasing. The EMA of stock data is similar to the SMA, the difference with the EMA is that the calculations are dependent on the data for the days prior to the current day. A rising moving average means prices are increasing while a decreasing moving average means prices are decreasing which can signify the type of trend the company’s stocks are experiencing. The graph below analyzes PayPal stock prices, the SMA is expressed by the blue line and the EMA is expressed by the red line. Both moving have the same pattern showing a current trend of increasing prices, however the EMA shows decreasing prices from October to November.

(Stock Charts, PayPal Simple Moving Average and Exponential Moving Average, 2018)

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Bollinger Bands Another technical analysis indication which can help analyze current and predict the future possible changes of stock prices are Bollinger Bands. Bollinger Bands are based on the volatility of the standard deviation, which changes as volatility increase of decreases (Stock Charts, 2018). When looking at Bollinger Bands, the middle band is the Simple Moving Average (SMA) of the data while the outer bands measure the data set 2 standard deviations above and below the simple moving average (Stock Charts, 2018). When the volatility increases the bands widen, when the volatility decreases, the bands are narrow. A stock is considered overbought when the price starts moving closer towards the upper band, when the price moves closer to the lower band its oversold. PayPal’s Bollinger Bands shows the stock price is $83.51, the upper band is $88.31, the lower band is $74.82 and the average is $81.57. In October the stock was oversold, it appears to be more leveled as of recently not being oversold or overbought.

(Stock Charts, PayPal Bollinger Bands)

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Moving Average Convergence/Divergence Oscillator The Moving Average Convergence/Divergence Oscillator (MACD) takes a look at the trend and momentum of the stock. The MACD looks at the convergences and divergences of the moving averages as the MACD fluctuates above and below zero (Stock Charts, 2018). A convergence occurs when the moving averages move towards each other while the divergences shows the moving averages moving apart from each other. When Analyzing a MACD graph, where the MACD line lies compared to the center line determines the momentum of the data. When the MACD lies over the center line, it means momentum is both upward and increasing, when the MACD lies below the center line, then momentum would be downward and decreasing. The longer the MACD remains positive, it means there is a bullish trend, a long negative MACD line is a bearish trend. When analyzing the MACD graph for the PayPal (outlined in blue), observe that the MACD (black line) had a substantial amount of time above the center line (from May to early October), it has been under the center line since October 6 There is currently a sustained downtrend in the stock prices for the company below zero indicating a bearish trend.

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(Stock Charts, PayPal MACD, 2018)

Money Flow Index The Money Flow Index (MFI) is an oscillator that uses both price and volume to measure buying and selling pressure (Stock Charts, 2018). MFI is positive when the typical prices rises and negative when the typical prices declines. PayPal’s MFI appears to fluctuate, over 80 in late May showing overbought conditions and dropping under 20 in mid October showing oversold conditions, the MFI is currently at 57.34 which is good value in terms of purchasing the stock.

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(Stock Charts, PayPal Money Flow, 2018) Relative Strength Index One of the important things to analyze, when looking at a stock and its price, is the speed and change of the price movements of the stock analyzing the Relative Strength Index (RSI), with a range of 0 to 100, an optimum RSI range is 30 to 70 (Stock Charts, 2018). When the RSI is below 30, it would signify the stock is being oversold, when the RSI is above 70 it signifies the stock is being overbought. When a stock is oversold, it means that the price of the stock falls below the true value, while an overbought stock means the price of the stock has risen so much due to too much purchasing of the stock. In the graphs below, the bottom graph, outlined in red shows the RSI of the PayPal. The RSI stays within the optimum range, it does drop below 30 from October 8 -15 showing the stock was being oversold. As of currently the RSI has gone above 30 and now lies at

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49.56 showing the stock is optimally performing, the stock is not being oversold or overbought.

(Stock Charts, PayPal Relative Strength Index, 2018) III.

Conclusion In the technical analysis conducted for the PayPal, the report focused on the Standard Deviation, the Simple Moving Average and Exponential Moving Average, Money Flow, Bollinger Bands, the Moving Average Convergence/Divergence Oscillator, and Relative Strength Index. After analyzing the graphs of each indicator, it appears PayPal stock saw volatility over the 180-day period, the stock was being oversold in October 2018, however the stock is currently performing optimally. Based upon the technical indicators there appears to be some risk involved with purchasing the stock but appears neutral at this time neither overvalued or undervalued.

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References PayPal. (n.d.). Retrieved from https://investor.paypal-corp.com Stock Charts. Standard Deviation (Volatility). (n.d.). Retrieved from http://stockcharts.com/school/doku.php? id=chart_school:technical_indicators:standard_deviation_volatility Stock Charts. Moving Averages - Simple and Exponential. (n.d.). Retrieved from http://stockcharts.com/school/doku.php? id=chart_school:technical_indicators:moving_averages Stock Charts. Money Flow. (n.d.). Retrieved from http://stockcharts.com/school/doku.php? id=chart_school:technical_indicators:money_flow_index_mfi Stock Charts. Bollinger Bands. (n.d.). Retrieved from http://stockcharts.com/school/doku.php? id=chart_school:technical_indicators:bollinger_bands Stock Charts. MACD (Moving Average Convergence/Divergence Oscillator). (n.d.) Retrieved from http://stockcharts.com/school/doku.php? id=chart_school:technical_indicators:moving_average_convergence_divergence_macd Stock Charts. Relative Strength Index (RSI). (n.d.). Retrieved from http://stockcharts.com/school/doku.php? id=chart_school:technical_indicators:relative_strength_index_rsi Stock Charts. PayPal Standard Deviation. (2018). Retrieved from https://stockcharts.com/h-sc/ui Stock Charts. PayPal Simple and Exponential Moving Averages. (2018). Retrieved from https://stockcharts.com/h-sc/ui Stock Charts. PayPal Bollinger Bands. (2018). Retrieved from https://stockcharts.com/h-sc/ui Stock Charts. PayPal Simple and Exponential Moving Averages. (2018). Retrieved from https://stockcharts.com/h-sc/ui Stock Charts. PayPal MACD. (2018). Retrieved from https://stockcharts.com/h-sc/ui

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Stock Charts. PayPal Relative Strength Index. (2018). Retrieved from https://stockcharts.com/hsc/ui Stock Charts. PayPal Aroon Oscillator. (2018). Retrieved from https://stockcharts.com/h-sc/ui...