New Trade: Long Paypal ($PYPL) & Short Twitter ($TWTR)

By: ispeculatornew
Date posted: 04.01.2016 (3:57 am) | Write a Comment  (2 Comments)

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Today I am opening my 11th trade of the year between 2 stocks that trade at similar forward P/E ratios. In terms of finding a trade, this was my most challenging of the year. Part of it is having 6 live trades (thus 12 stocks that are not available out of my universe). I also can’t remember having so many of my stocks on “hold” because I do not have a good enough feeling on them. In the end, I did hesitate between a long MTCH vs short IAC trade and this one. Let me make the case why I’m going for PYPL vs TWTR. As is always the case you can see the existing live trades here:

http://www.intelligentspeculator.net/livetrades

Let’s start off by looking at the numbers:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaEarningsRevenue/Share
TWTRTwitter Inc16.55N/A21.9-27.558.093.566.291.284/26/20163.35
PYPLPayPal Holdings Inc38.637.5121.996.4915.244.0911.24N/A4/27/20167.57

The growth story is very interesting. Looking at this chart, you could probably argue either way so give me a shot at explaining my perspective on this one

PYPL_TWTR_chart

Long Paypal (PYPL)

Paypal is one of those traditional players that I’ve been writing about for years. Of course, now that it’s no longer part of EBAY, it becomes easier to trade. Paypal has been under threat for years but has been able to keep up its growth. I do think that smaller players like Stripe but also giants like Apple and Google will end up taking decent market share in the payments space over time but that will likely take quite a bit of time and I do think that Paypal will be able to keep up its steady double digit growth for several more years making it an attractive buy at these levels.

PYPL_chart

Next earnings: April 26th 2016

Short Twitter (TWTR)

I have a love-hate relationship with Twitter. On one hand, it is perhaps my most used app, a product i truly love to follow live events, and the subjects that interest me most. It is also a fascinating company with a troubled history. As a company, Twitter continues to struggle to appeal the mainstream. Part of the problem is being compared to Facebook but even without that comparison, the user growth has been incredibly disappointing. Yes, revenue growth has been very impressive because of an increased revenue/user but that will be very difficult to keep up and I am now a doubter. Having a part time CEO isn’t great either by the way. I would love for TWTR to make a comeback but just hopefully not in the near term:)

Just look at the chart of traffic from Google trends:
gtrends
TWTR_chart

Next earnings: April 27th 2016

Disclaimer: This trade on PYPL-TWTR will be done on today’s opening,
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2 Comments

  1. Comment by Ken — April 1, 2016 @ 10:11 am

    Wait, you’re already Long PYPL, short RAX. Are you doubling up on PYPL?

  2. Comment by IS — April 5, 2016 @ 10:48 am

    Yes, I rarely do this but I am here. I might be closing one of them before the next PYPL earnings but we’ll see.

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