PayPal: Heads I Win, Tails I Win (Part I)
Heads I Win, Part I
When the news broke, I expected a slight drop in $PayPal(PYPL.US$. When I saw the drop down below $260, I got greedy. For the record, I bought more PYPL at $255.62 with a smile on my face.
PYPL got cheaper but the value is the same, or better, as it was just 1-2 days ago. I'll explain more shortly. For now, just consider my point of view, which is that the price of PYPL went lower so I got more for my money. I ended up with a 5% discount because of some moderately good news. (More on that soon.)
PYPL is in a high growth industry.
PYPL commands significant market share.
PYPL is growing very fast.
PYPL is innovating like crazy.
PYPL commands significant market share.
PYPL is growing very fast.
PYPL is innovating like crazy.
Furthermore, I was very clear:
I'm very bullish on PYPL below $250 and I'm bullish at $275. And, in fact, I've established a starter position recently at $275. I'll continue to add small amounts on the way down, if that happens.
Therefore, at $255, I feel very good about buying more PYPL. It's high quality, well managed business, in a rapidly growing market. In short, when the price dropped about 5%, it simply meant getting more PYPL at a discount.
Tails I Win, Part I
Now, let's suppose that the $Pinterest(PINS.US$ deal falls through. In that case, I am happy because I was able to purchase more PYPL at a lower price. Again, same company, but a better bargain.
Furthermore, let's assume the deal falls through and markets reflect on this. It's my feeling that investors will simply reprice PYPL back upwards, toward $270 to $275, or higher.
I have no idea how long that "rerating" would take, but there's no reason to think that an offer to buy PINS would permanently impair PYPL. I just don't see it. Making an offer doesn't usually cause any real damage. If you have data otherwise, please offer it up.
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