Earnings season is underway. And this quarter, companies that miss on expectations are getting hit harder than average. However, companies that beat expectations are being rewarded above average.
And for companies that aren’t only beating on earnings, but are raising their expectations for the full-year, that trend is even better. As investors demand to see results from companies this quarter, those who can deliver are in great shape.
That includes payment company PayPal (PYPL). Shares popped higher after the company beat on earnings and raised full-year guidance.
However, PayPal shares are still down over 20% in the past year, as investors have piled into larger tech names more focused on AI. That’s despite posting reasonable growth, with revenues up 10% over the past year and earnings up 12%.
At current prices, PayPal is almost a value play, with shares trading near 14 times current and forward earnings.
Action to take: With their low valuation and earnings beat, PayPal may finally be ready to break higher. Today’s buyers can likely see double-digit returns by the end of the year, especially if earnings continue to impress.
For traders, the November $70 calls, last trading for about $3.15, could see mid-to-high double-digit returns on a follow-up rally to the earnings report in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.