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Market Stance: BEARISH (since October 15, 2016)
* An average of managed accounts, net after all commissions and fees.
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* Buy prices shown are net after commissions and fees.
Today, Friday, October 21, 2016, I bought PYPL, for both client and my personal accounts.
PayPal Holdings, Inc. provides digital and mobile payments on behalf of consumers and merchants worldwide.
This stock is a component of the S&P 500, the S&P 100, and the NASDAQ 100.
Here's why I bought this stock:
+ Earnings news: Yesterday, Oct 20, after the close, the company announced results for the quarter ended Sep 30. Earnings came in at 35c per diluted share (vs 31c last year and analysts' consensus 35c). Revenue was up 18% to $2.67 billion (analysts' consensus $2.67 billion).
+ Breakout: The stock is up sharply today on heavy volume, breaking out from a 7-month range.
+ Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +17%, +19%, +15%, and, most recently, as cited above, +18%.
+ Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Dec 15 vs Dec 14: 36c vs 29c Mar 16 vs Mar 15: 37c vs 30c Jun 16 vs Jun 15: 36c vs 33c Sep 16 vs Sep 15: 35c vs 31c
Valuation: At 25 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 17%, the stock may not be a bargain, but is at leas at priced within reason.
+ The company's industry group ("Finance - Credit Card / Payment Processing") is ranked #106 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally rising slightly over recent weeks and months.
+ The stock's 200-day moving average is rising, indicating a long-term uptrend.
I chose to buy the stock in spite of the following negative factor:
- Strong but falling earnings-per-share estimates for next year: According to recent data from First Call, the consensus earnings estimate for 2016 is $1.50, revised upward from $1.49 90 days ago (and up from 2015 actual earnings of $1.30); and the consensus estimate for 2017 is $1.73, revised upward from $1.76 90 days ago.
-KD, Friday, October 21, 2016
* Buy and sell prices shown are net after commissions and fees. This means that the gain/loss shown is also net after transaction expenses.
Today, Friday, October 21, 2016, I sold SPY, for both client and my personal accounts.
I sold just enough SPY to pay for PYPL. We remain fully invested.
-KD, Friday, October 21, 2016
* Buy prices shown are net after commissions.
** Current prices are at least 20 minutes old.
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