4 Reasons I Love PayPal As The Pinterest Speculation Ends
PayPal (PYPL) posted a one-sentence response to recent rumors that paired PayPal with the social network name Pinterest (PINS) in a deal that would have made no sense to me. Apparently, the PayPal leadership led by CEO Dan Schulman felt the same as I did.
Rumors began to swirl last Wednesday, the first of three days of PayPal stock decline. Bloomberg News had reported that the two sides were in talks and that the price announced at the time was $ 45 billion, or about $ 70 per share.
I spent the end of the afternoon Wednesday in a Twitter (TWTR) “Spaces” (chat room) that involved a host of traders younger and more savvy than me. They respectfully asked my opinion first. I said that I didn’t see a good reason for this corporate marriage, but that I could miss something, and I’m admittedly better at traditional finance analysis than FinTech.
I left it to the other traders, eagerly awaiting the possibility that one of them might have had a thought that hadn’t crossed my mind. For the most part, these young traders were even more adamantly opposed to the potential deal than I was. This confirmation by my younger peers prompted me to initiate a long position on PYPL on Thursday and lie down on Friday as the stock slumped.
Ah, the sentence? Glad you asked. “In response to market rumors regarding a potential acquisition of Pinterest by PayPal, PayPal has stated that it is not pursuing an acquisition of Pinterest at this time.”
Monday morning. Pre-opening. The PYPL rose 13%, but did not return to last Tuesday’s levels. PINS was down 15% and is trading below levels last Tuesday. My long position is in PayPal, a name on which I had long sought an entry point, as I felt I had missed the fantastic performance of late 2020, early 2021. Stocks closed on Friday, 22.5% below their June high of $ 310.
PayPal is expected to release the company’s third quarter financial results in the second week of November. The name is very covered. Wall Street is looking for EPS of around $ 1.08 for revenue of $ 6.24 billion. These numbers, if accurate, would equate to profit growth of a dime over revenue growth of 17.5%.
Going back to the second quarter, total active accounts topped 400 million, TPV (total payment volume) jumped 40% to $ 311 billion on 4.7 billion payment transactions, an increase of 27 billion %. Merchant services volume grew 48%, while Venmo handled $ 58 billion in POS, up 58%. Still, revenue was a bit light compared to expectations for the second quarter, and the company eased its guidance slightly for the full year.
The opportunity was born, but you had to be patient. Hopefully this rumor – or was it a failure? – was such a catalyst. Maybe PayPal is looking for a better suited partner to merge with a financial services technology company. I guess sooner or later this story will tell for itself.
Why invest in PayPal?
COVID only accelerated what was already underway. The move towards a cashless society has been driven by the consumer, rather than a government that simply hopes to capture a record of every transaction. Buying now, paying later is part of it, and its demand is high for those trying to move away from traditional credit cards. For this company, BNPL’s growth has been more of an external story (outside the United States). The company has also allowed users to buy, sell and hold cryptocurrencies mounted on Venmo since last April.
Additionally, PayPal recently launched its âSuper App,â which combines almost everything in one place, and is seen as a competitive strike against Square’s Cash App (SQ). Finally, because you knew I would mention it, at least by the end of the second quarter, the company’s net cash (cash, cash equivalents, short-term investment) was more than twice the total indebtedness of the company. ‘business. , while free cash flow, although down 33% this quarter, still exceeded $ 1 billion.
This morning’s move keeps PYPL in the upper chamber of our downslope fork. The near term goal of this trade is to exit at or near the 50 day SMA, currently $ 271. What could bypass this potential move would be a deadly crossover, if that 50 day line breaks below the 200 day SMA at $ 267 which will happen if PYPL dips below both averages here.
What we would like to see would be a compilation of what could be an inverted head and shoulders pattern. Right now we only have a cleavage and a half head, so there is a long way to go. We see this and then we have to readjust our goals for the job.
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