In April and June, I shared a positive outlook for PayPal, expecting a breakout after a long period of stability. Recent events have confirmed this view, as PayPal has now surpassed a key resistance level at $68, which had been holding it back. This breakout signals a major shift for the stock, suggesting the start of a new upward trend and presenting a good opportunity for investors to increase their holdings. The momentum from this breakout, along with PayPal’s strong performance compared to the broader market, suggests that the stock might continue to rise, potentially reaching around $90.
Supporting this optimistic view are PayPal’s solid fundamentals. The stock is currently trading at a forward earnings multiple of just 15, indicating it is undervalued, given its strong growth prospects. Expected earnings per share growth of 14%, revenue growth of 8%, and net margins of 14% all point to an appealing valuation. These factors suggest that PayPal is set for a notable rebound despite recent challenges.
To benefit from PayPal’s recent breakout, consider a strategic trading approach: buying the October 18, 2024, $70/$80 Call Vertical spread for $3.77. This involves buying the $70 calls at $4.83 and selling the $80 calls at $1.06. This strategy allows investors to profit from the anticipated rise while managing risk. The trade offers a potential maximum profit of $623 per contract if PayPal rises above $80 at expiration and a maximum risk of $377 per contract if the stock falls below $70, fitting with the positive technical and fundamental outlook for PayPal.
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