Speculative Idea: Paypal

Briefly (key findings)

Consider the following speculative idea: buy shares of fintech business PayPal (NASDAQ: PYPL) and wait for them to rebound.

The bottom line: It can allow you to get up to 34% recovery, since everything is in order with the companies.

The reason for the growth of shares - their long fall. Since April, a drop of 34%

The plan: buy shares today at $193 and below if possible.

Risk or next support line: Stock could drop to $173 (10% loss)

What are we based on? The analysis took into account technical analysis, fundamental indicators, business organizations, our personal experience. However, one must understand that a speculative idea may not come true.

Why do we think it will burn out?A: Paypal is still a strong business. Its future partnership with Amazon could greatly increase revenue. Revenue growth has remained stable over time.

Paypal has been growing revenue for 10 years

How do we set our expectations? (if long :)

Drop. Paypal shares have already lost their value since July this year. At first they were 308,5 dollars, now they are 193 dollars. The last report played a big role in this. He did not even manage to show the desired figures for the company. However, there is a possibility that for certain reasons there will be a rebound in shares.

Upcoming Christmas and New Year. Analytical agencies forecast an increase in the costs of US residents in November-December, when holidays are celebrated in the country. The maximum level of consumption in should occur in the area of e-commerce (thanks to the pandemic), in which Paypal is very strong. As soon as the company reports for the Christmas quarter, the resulting new numbers may return the favor of investors.

Don't underestimate the power of Paypal? Even in the United States, which is considered a very technologically advanced state, cash takes a large share in the calculations. Therefore, we can safely hope for the continued growth of PayPal - the transition from cash to electronic. According to the latest report, kickbacks may occur, which are caused by the reception of settlements made in a non-cash form. However, one should not forget about the sheer size of PayPal, which should always determine modern opportunities for capitalization with the increase in fintech, regardless of whether it will be a digital currency, the presence of PayPal on Amazon. There is no need to see something terrible in the fall that happened.

There is a high probability that there will again be a new round of persecution of cash, the forced development of online business. The main reason will be a permanent pandemic. An increase in the number of investors who have a reasonable view of PayPal earning income based on these processes should have a greater positive impact on the securities. Paypal cannot be compared to the usual card organizations such as Visa or Mastercard. However, this organization is considered significant for the sector of non-cash payments and must be reckoned with. And this fact allows the company's shares to achieve concrete future success. And the business of the company itself can be safely called, on the whole, very stable (they have already held leadership positions in the market for several years)

All the factors that made it possible to achieve an increase in quotations and the growth of the company's business still exist on the market. Therefore, we can safely expect quotes to reach their past values in a certain future. After all, PayPal is a giant business, which is characterized by a very large exit margin - 20% of the income received.

What can get in the way?

Fintech. The increasing popularity of cashless payments, of everything that concerns them, leads to certain consequences: start-ups that bring only losses begin to cost an indecent amount. An example is Paidy's installment payment app, which PayPal acquired for $1,7 billion. This amount is approximately equal to 25 Paidy revenues, which the company receives each year. And while it is still not entirely known whether a profit will be made at all. Informational messages about the desire of PayPal to acquire for $ 45 billion unprofitable Pinterest did not appear just like that. Ultimately, however, PayPal chose not to proceed with the deal. And this desire caused only joyful feelings among the owners of the organization's shares.

PayPal's development will be influenced by the company's ability to expand further and find and buy small startups. Unfortunately, there may come a time when PayPal buys a start-up for a lot of money, from which there will be no use at all. An example is the discussion of the Pinterest deal, which was eventually debunked, but the risk that Paypal would not benefit from this could remain.

Now you just need to trust the genius of PayPal leaders, who so far manage to constantly win, get the maximum profit for the further development of the business. However, the global growth of investments in fintech is a serious problem for PayPal. It implies that the organization needs to acquire at a very high price assets that will not bring it any benefit.

Price tag.Even after the fall, PayPal is expensive: P/E under 46 and P/S around 9,26. The company's shares can still succumb to price fluctuations. The main reason for this can be negative advertising news: conflict situations with Amazon, lawsuits from regulators that relate to user contracts, and other unpleasant surprises. Any reason can cause the stock to fall. When such situations arose, the famous analyst Marcus Aurelius said the following words: "Power extends over thoughts, but does not influence events." It is important to understand and take this into account.

Witch season.A number of factors can be cited as the main reasons for the slowdown in the organization's business over the past quarter:

decrease in the degree of confidence of buyers, their waste.
logistical problems specific to trade representatives who have chosen the platform of the organization. They weren't able to sell as much product as they had planned.
An increase in activity towards physical stores, which only negatively affected online trading.

These factors are valid only for a certain time. But at the same time, they can seriously affect the company's reporting. In general, there is nothing wrong with this. However, given the high price of PayPal, investors of investment capital want to get from the company rapid growth, which, due to the circumstances described, may not be.

To summarize

Now shares can be purchased at a price of 193 dollars. And then one of the following options may arise: