PayPal has lost the vast majority of its market value over the past three years. However, it continues to operate a solid payments business with nearly half a billion active users each month. Yet, it is seemingly overlooked by many investors. I think its recent strength and performance warrant a second look, especially when its growth metrics and margins look solid — and the risk/reward balance is favorable to add long exposure. PYPL has declined 80% over the past three years, but recently, it has formed a bottom with a series of higher highs and high lows over the past six months. If we zoom in, we see it has the potential to break above its $68 resistance level, which would target the $73 gap fill level in the short run. Over a longer period, a breakout above $68 could target the low $100s as an extended target to the upside. If we were to dive into the business, we see a payments company that focuses on delivering growth and improving margins. Having averaged 16% earnings per share growth over the past few years and expecting 13% over the next three, PYPL is downright cheap at only 12x forward earnings. That is especially true given operating margins that exceed 16% and little debt on its balance sheet. If PYPL traded at its industry and historical average of around 21x forward earnings, it would imply a stock price of $106 — just above our technical upside target. The trade With options on the inexpensive side, I think the best way to structure this trade is with a simple call option. I'm going out to the June expiration and buying a $65 Call for $4.25 Debit. This would risk $425 per contract if PYPL is below $65 at expiration, while providing me with unlimited upside exposure. DISCLOSURES: None THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
News Related-
Leon Cooperman says it's a stock picker's market. Here are his new favorite bets
Billionaire investor Leon Cooperman thinks that it's a stock picker's market and only individual names will offer value for investors as the overall market struggles. A new filing just revealed his top selections. The chair and CEO of Omega Advisors held about $167 million worth of Energy Transfer at the ...
See Details: Leon Cooperman says it's a stock picker's market. Here are his new favorite bets -
These bond funds are among the top performers in 2023 – Here’s what investors should do next
It's been a good year for yield-chasing investors willing to take some risk in fixed income. The Federal Reserve's rate hikes since March 2022 have had the pleasant side effect of lifting yields on interest-bearing assets ranging from Treasury bills to money market funds. The lowly 1-year certificate of deposit ...
See Details: These bond funds are among the top performers in 2023 – Here’s what investors should do next -
Goldman's hedge fund VIP portfolio is up 31% this year. These are the stocks on the list
Hedge funds' favorite stocks have crushed the broader market in 2023, returning 31%, thanks to mega-cap technology companies, according to Goldman Sachs. The Wall Street bank analyzed the holdings of 735 hedge funds with $2.4 trillion of both long and short equity positions at the start of the fourth quarter, ...
See Details: Goldman's hedge fund VIP portfolio is up 31% this year. These are the stocks on the list -
A bearish options bet against this coffee stock showing some fatigue
Identifying underperforming stocks is becoming a challenge, with the broader market approaching new highs. Starbucks (SBUX) looks like it could be an interesting stock to bet against. While the stock saw an impressive 18% surge post an earnings beat at the start of the month, it's displaying indications of fatigue, ...
See Details: A bearish options bet against this coffee stock showing some fatigue