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PayPal Just Fell Into Correction Territory – Here’s Why One Trader Says The Stock Will Soon Rally

PayPal Just Fell Into Correction Territory – Here’s Why One Trader Says The Stock Will Soon Rally

PayPal investors have checked out, but a rebound may be just around the corner. Here’s why.

Tuesday’s stock sell-off sent PayPal (NASDAQ: PYPL) stock spiraling downward, pushing the stock into correction territory after it fell more than 10% off its 52-week highs.

But Todd Gordon, the founder of, told CNBC on Tuesday, that “The stock has hung in extremely well in this period of volatility” and is now primed for a breakout.

“We’ve held the 50-week moving average. You can see that has been key support on several occasions, and it looks like this time is no different and we should be able to go up and retest these old highs,” Gordon said.

Source: CNBC.

“We just did a nice double bottom here into the $76 level, and the stock has just come springing back into the $88 level,” he said. The price has tested that level a total of three times. “Usually when a stock tests a level on the third or fourth time, usually there’s enough conviction in the direction of that trend, which is up, to punch it through.”

The $88 level was last reached on Monday of this week before things took a tumble on Tuesday, and have since continued to fall. At the moment, the price sits just 4% below that $88 range, but Gordon thinks the stock will head much higher.

“From $88 I like to get up towards about $92, just to retest those old highs,” he said.

The $92 level would see the stock climb nearly 9% from the price as of this writing. Gordon said he is buying the $88 call and selling the $92 call with an expiration of January 4.

PayPal stock is up just under 19% in the last year and up nearly 15% year-to-date.

In its last quarter, the company reported revenue growth of 14% to $3.68 billion, with GAAP EPS coming in at $0.36 per share. Its active user base grew 15% to 254 million in Q3, and transaction volume was up as well – gaining 27% year-over-year.

In the words of the company’s CEO, Dan Schulman, “PayPal had another excellent quarter. Our strong balance sheet and cash flow enable us to aggressively invest in innovation and growth, creating sustainable and long-term value for our shareholders.”

And aggressively investing is exactly what the company has been doing. Back in June, the company announced several acquisitions totaling $2.7 billion that help expand the company’s footprint across the payments landscape worldwide.

That spending spree is set to continue as the company plans to spend between $1 billion and $3 billion per year for the next several years on acquisitions to solidify its dominance.

Such a commitment to its business spurred activist investor Dan Loeb of Third Point to say recently that, “We see parallels between PayPal and other best-in-class internet platforms like Netflix and Amazon: High and rising market share, untapped pricing power, and significant margin expansion potential.”

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