In April and June, I presented a bullish thesis for PayPal that the company had bottomed and was poised for a breakout. Since that article, PayPal has continued to improve, and earlier this week it finally broke out of two years of consolidation, sparking a new bullish signal for investors to seek further exposure to PayPal. On the weekly chart, PayPal decisively broke through key resistance at $68, a level it had struggled at during its consolidation phase. This breakout, coupled with improving momentum and outperformance relative to the market, suggests that PayPal is poised to continue its upward climb. The next upside objective for this bullish trend is around $90. Despite past difficulties, PayPal is fundamentally undervalued. The company’s stock trades at just 15 times expected earnings, which is attractive given its future earnings per share growth of 14%, revenue growth of 8%, and competitive net profit margins of 14%. These metrics suggest that PayPal is not only undervalued relative to its growth potential, but also well on its way to a turnaround. The Trade To capitalize on the upside breakout, we recommend buying a 10/18/2024 $70/80 call vertical at $3.77 debit. This includes: Buy 10/18/2024 $70 call for $4.83 Sell 10/18/2024 $80 call for $1.06 This call vertical spread allows you to benefit from the bullish trend while limiting your risk. The total profit potential on this trade is $623 per contract if PYPL is above $80 at expiry, with a risk of up to $377 per contract if PYPL is below $70 at expiry. This strategy is consistent with our bullish technical and fundamental thesis on PYPL. Disclosures: NoneAll opinions expressed by CNBC Pro contributors are the contributors’ own opinions and do not necessarily reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliates, and may have been previously disseminated by the contributor on television, radio, the Internet or other media. The above content is subject to our Terms of Use and Privacy Policy. This content is provided for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to purchase any securities or other financial assets. The content is general in nature and does not reflect any individual’s unique personal circumstances. The above content may not be suitable for your particular situation. You should strongly consider seeking the advice of your own financial or investment advisor before making any financial decisions. Click here for the full disclaimer.
This settlement stock has broken out of a two-year sideways pattern. Trade it using options
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