Is There A Bargain Opening Up With PayPal (NASDAQ: PYPL)? There were not many on Wall Street who would have forecasted a 35% drop in PayPal (NASDAQ: PYPL) shares when they were trading at all time highs back in July.

There were not many on Wall Street who would have forecasted a 35% drop in PayPal (NASDAQ: PYPL) shares when they were trading at all-time highs back in July. But concerns around, and then confirmation of, soft forward guidance has done just that. On Monday of this week, their Q3 numbers showed a solid beat on the earnings per share number versus what analysts had been expecting, but a dirty miss on their topline revenue figure.

For a company that had made a bit of a habit of beating the consensus, this was definitely a surprise, and one that was confounded by weak forward guidance then shared by management. Specifically, they gave a Q4 revenue forecast of between $6.85 billion and $6.95 billion, well shy of the $7.24 billion the street had been expecting. Q4's EPS is also expected to be softer than previously thought, due to hit $1.12 versus the $1.28 previously estimated.

Large Gap Down

These numbers and guidance were released after the bell on Monday, and not surprisingly shares opened with the bad kind of a bang for yesterday's session. In what was one of the bigger gap downs in the stock's recent history, shares opened about 8% lower and went on to fall as much as 12% during the worst of it. Still, they finished off the lows and were flat during Wednesday's pre-market session so it will be interesting to see what happens next.

You see, there are several reasons to think this is an overreaction and that there is in fact a bargain on offer. The likes of Morgan Stanley were quick to update their price target on PayPal shares by dropping it from $340 to $265, but that's got to still be appetizing to those of us on the sidelines considering PayPal closed at $205 last night. That's a full 30% upside that James Faucette and his team thinks is still on offer, as they reiterated their Overweight rating on the stock. In a note to clients they wrote; "PayPal is being adversely impacted from hangover impacts of the pandemic; tightening supply chains, consumers shifting back to in-person to assure delivery, roll-off of stimulus are all creating a bigger drag on growth than we had previously anticipated, negatively impacting our '22 estimates".

Dominick Gabriele at Oppenheimer made a similar move, reducing his price target to $268 while reiterating his Outperform rating. He noted how "between eBay's (NASDAQ: EBAY) pressure on revenue growth, combined with further investments in the platform/reserve build grow over, we believe PayPal's 2022/2023 adjusted operating margin could be under pressure vs. 2021".

Taking Advantage Of The Dip

But investors have other growth drivers to look forward to, such as Venmo being added to Amazon (NASDAQ: AMZN) checkout, the expansion of PayPal's Buy Now, Pay Later business, and the continued monetization of other services like Honey. There seems to be very much a sentiment on Wall Street that near-term headwinds are driving shares lower, but that long-term growth trends remain intact.

What that means for those of us either considering adding to an existing position or in fact establishing a new one is that we're likely looking at a decent discount on offer in PayPal shares right now. The unexpected acceleration in growth from the pandemic last year seems to have run its course, and it's not hard to understand that revenue growth might be flattening somewhat this year as a result. But the key thing is PayPal is holding on to those gains, with both management and analysts expecting the good times to return in 2022 and beyond.

That's not to say that investors should just pinch their noses and jump in feet first. As we've seen with Peloton (NASDAQ: PTON) shares after their recent earnings, it could get worse before it gets better. There's some strong technical support on PayPal's chart around the $180 level, and you could expect most of Wall Street to be backing the truck up at that point if shares do indeed fall that far. That would require about another 10% drop, but with the stock's RSI already in the low 20s, indicating extremely oversold conditions, it might be too much to hope for.