PayPal has been in an absolutely disgusting downtrend for the last several months, wiping out billions in stock value as the company's fundamental growth has slowed and margins have come under pressure. And, while the stock is still somewhat "expensive", trading at 30x net income, it is beginning to look interesting.
Trading at only 19x cash flow, and extremely oversold, it's possible that a long term leveraged position in Leap contracts could provide a massive payout should the "fundamental" situation improve somewhat, or should the stock re-rate higher. I think the latter is unlikely given the rising rate environment (although a huge % of the hiking cycle is now baked in), but the former could definitely occur.
Covid sucked a lot of demand forward, and now with it on the wane, results have been subpar. However, as the company continues to pivot back to growing in the demand air pocket generated, the stock could see potential price appreciation back to $150 in the next year or two. $100 strike calls for 2024 are priced at 27 bucks, which is a quarter of what you would pay to own the stock outright. Considering they cost you $1 in theta per day, it seems like a no brainer if the stock goes on a longer term run, or even takes a breather from the selloff with an oversold bounce.
The stock is the most oversold it's been in it's history, with a 21% discount to the trailing average price. This is also outside of the long term linReg mean -> what we are witnessing is a historic market for this stock.
I am a fan of PYPL and I agree with you. But what worries me is the insane amount of competition in the space. They do have lots of cash flow sitting around, and I hope they use it wisely.
Michael_Wang_Official
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I have literally been screaming the same thing in my newsletter. This is almost a free cash grab. Heavily discounted - buyers here will be greatly rewarded within the next few years imo.
PropNotes
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@Michael_Wang_Official, yup. main question is how much you're willing to risk. If you're willing to buy the calls for $22 of premium and let them ride....hard to see how this loses mid/long term.
BonoboJoJo
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@wolneyyy break even at Jan24 expiration is like 127/share haha.. this is a really solid play
OptionsRising
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PYPL may be a great Q2 comeback stock. I am eyeing it for swing calls, not leaps. Watching COIN also with earnings next week.