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‘Pay Later’ Stocks Like Paypal Have Investors Looking to ‘Sell Now’

‘Pay Later’ Stocks Like Paypal Have Investors Looking to ‘Sell Now’

The concept of “buy now and pay later” isn’t exactly new. However, it was typically reserved for higher dollar items that most people didn’t have the cash to buy. Nowadays, installment plans are available for virtually anything. These types of plans have helped PayPal Holdings Inc (NASDAQ: PYPL) rocket higher during the pandemic but the past week has seen more selling than it’s seen all year.

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  • These days, everywhere you go online it asks you whether you would like to finance your purchase. That has always been the case for using your credit card, but now we’re talking about taking out a loan for a pair of shoes. PayPal is one of the companies at the center of this trend and business has been booming during the pandemic.

    Their results have prompted companies like Microsoft to let customers finance the purchase of a new $499 Xbox in monthly installments. The offer is being done through a partnership with A U.K. fintech company called Klarna. This announcement is only one among many partnerships that are being forged.

    The question is whether the “pay later” trend is getting played out negatively with the share price of companies like PayPal.

    PayPal finished 3.2% lower on Friday and confirmed a lower high on Thursday near $198. The lower high is coming on the heels of the PayPal’s all-time high that it achieved on September 2. Friday’s close also found the share price closing below the 50-day simple moving average that was near $189.30.

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  • The close below the 50-day on above average volume is an indication of a change in the intermediate term trend. A 38.2% retracement of the trend from the March low is around $163. That is a typical retracement level of a prior trend.

    Option traders may want to consider buying a 20 NOV 20 185/180 long put vertical for around $2.50 or less.