Except for a short lived winning streak in July, the spin off from eBay hasn’t been as great as the bulls were hoping for. The $41B mobile/digital payments leader is down 20% from the July 20th high. However, the recent rally above the 3 month downtrend (preceded by a higher low last month) sets up for additional gains to come in the near-term. Continuation to the 50% retracement level would put shares at $36.27 (mid-point of the July high and August low), which is around the $36 resistance level. In order to keep risk in check, stop losses can be placed under the middle Bollinger Band at around $32.70.

 

 PayPal.png

PayPal trades at a premium to the overall market, but the latest correction in U.S. equities and more specifically in biotech/technology sectors has of course weighed on shares. PYPL trades at a P/E ratio of 22.85x (2016 estimates), price to sales ratio of 4.71x, and a price to book ratio of 3.18x. This may seem rich until you factor in 19%+ earnings growth (PEG ratio of 1.19x) and 16% revenue growth (topping $10B next year).

 

On October 14th, ahead of Q3 earnings results on October 28th, Jefferies reiterated their outperform rating and a $44 price target ($1.45 above the all-time high). Back in late July, the company topped Q2 estimates by $0.02 in their first report as a publicly traded company.

 

PayPal Options Trade Idea

 

Buy the Oct 23 weekly $34/$36 bull call spread for a $0.70 debit or better

 

Stop loss- None

 

1st upside target- $1.25

 

2nd upside target- $1.95

 

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