Time to say goodbye to a Pal

Our global client portfolios have owned PayPal (PYPL) for over 4 years, soon after the company spun out of eBay in 2015.

On average, clients paid $33.60 for the stock.

In late May 2020 we harvested a third of the position and yesterday we sold the remaining holding at $204.00 per share because subjectively, it seems this is as good as it’s gets across a host of factors.

PYPL is also mimicking the activity of the Nifty 50 stocks of 1960’s and early 70’s where the phenomenon of buying growth stocks at any price became the norm.

Fundamentally, PYPL now has a market cap of $240 billion, revenue of $18.2 billion and EBIT of $2.7 billion.

PayPal is trading on 13 times revenue and an astonishing 89 times its profit …I can’t help think that its priced for perfection.

In other words, how much more return are we trying to squeeze out from here on?

So why sell now and not earlier…

My technical analysis indicators now also suggest a host of stretched extremes where it seems that the odds for further gains may be laboured.

I asked myself if I’d be a buyer of PYPL with “new money” at these prices? My answer was “No”.

The risk/reward doesn’t seem to stack up, ……so then, why continue owning the stock, if I’m not prepared to buy more of it ?

September 1, 2020
rob@karriasset.com.au