Analyzing PayPal's Supply And Demand Into Earnings
Hey everyone! Just wanted to do some quick analysis & labeling of the supply and demand situation right now in the market for PayPal stock. Marked out on the chart you can see zones of supply and demand, and we are approaching a zone of demand coming into this earnings release.
Should PayPal post solid EBITDA and raise its outlook at all, then any bounce might be able to be traded risking off of this demand zone with a target of the previous supply zone around 305. Should it fail to do so, then the stock may breakdown past this zone of demand, and sink further as it's growth multiple is re-rated lower.
While PayPal is relatively expensive right now, with a FWD P/E of 51, its solid (and accelerating) growth of 24%ish over the last year may continue, thus driving the stock higher.
We are also trading at the recent relative limit of discount to average pricing, at nearly -8% to recent prices. This may be a signal of slowing future price acceleration to the downside into earnings.
A potential trade around this release would be a weekly anchor spread, which is a calendar with one leg pre earnings, and one post earnings. Should the stock vol begin to calm into earnings as investors position for the news, it may be a solid way to take advantage of that with a ~$300 win per contract.
Additionally, an interesting bet may be a far otm long strangle, with the long put lower than the zone of demand - aka a bet on a breakdown. If it happens, it may be ugly.
No matter the outcome, it's worth a watch.
Cheers!
Should PayPal post solid EBITDA and raise its outlook at all, then any bounce might be able to be traded risking off of this demand zone with a target of the previous supply zone around 305. Should it fail to do so, then the stock may breakdown past this zone of demand, and sink further as it's growth multiple is re-rated lower.
While PayPal is relatively expensive right now, with a FWD P/E of 51, its solid (and accelerating) growth of 24%ish over the last year may continue, thus driving the stock higher.
We are also trading at the recent relative limit of discount to average pricing, at nearly -8% to recent prices. This may be a signal of slowing future price acceleration to the downside into earnings.
A potential trade around this release would be a weekly anchor spread, which is a calendar with one leg pre earnings, and one post earnings. Should the stock vol begin to calm into earnings as investors position for the news, it may be a solid way to take advantage of that with a ~$300 win per contract.
Additionally, an interesting bet may be a far otm long strangle, with the long put lower than the zone of demand - aka a bet on a breakdown. If it happens, it may be ugly.
No matter the outcome, it's worth a watch.
Cheers!
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