- Information
- AI Chat
Pay Pal Evaluation
Investment Anly/Portfolio Mgt (FIN 672)
American University (USA)
Recommended for you
Preview text
PayPal (PYPL) Evaluation (Attached Are the Required Documents for The Security Evaluation) 1. On Attached Excel File 2. On Attached Excel File 3. On Attached Excel File, to help explain my valuation table, I used an expected long-term growth rate and weighted average cost of capital (WACC). For the long-term growth rate I decided to use a higher growth rate than the expected US GDP growth rate due to PayPal’s average growth rate represented in CAGR, and through the projected growth rates seen by analysts. Therefore, I felt it was prudent to use a growth rate that reflected the technology stock’s high growth potential. 4. 5. I believe the most important systematic factors when evaluating PayPal are the interest rate and the beta. The interest rate has been at a historical low for a long time, and at a certain point there will come a time that the rates will be lifted back causing a change in the market. The beta for PayPal is currently at 2 which means the stock is highly sensitive to the performance of the market. This explains the reason why the stock is currently above its value. However, this can change when the market begins to change. 6. When looking at the fundamentals of PayPal’s stock I found the growth rate of PayPal to be a huge component to why there is strong growth and interest in the security. There is a momentum in this stock, and the fact that it is in the technology sector, a Beta-sensitive market, this stock is on the rise. When looking at the historical growth rate and projected rate of PayPal, once can recognize that there is an evident growth rate that exists in this security. Whether or not this is due to an over confidence in a certain type of niche stock is up for discussion. The stock is viewed as over valued by not only my model, but Bloomberg as well. 7. At this current moment I would recommend a buy for PayPal, for no more than a quarter to two quarter investment. This is an action though I would suggest acting fast on due to several reasons. I believe we are at the end of a strong growth period in the market, therefore, one must be cautious when taking this investment. Currently PayPal is trading at 72, and is currently overvalued by my DCF model. However, this should not be seen as a sign of avoiding the security, as many stocks are seen as overvalued. Therefore, for the time being there is nothing wrong with adding this stock into someone’s portfolio. I would recommend placing a sell on this stock, when The Federal Reserve begins to lift the low interest rates. As I believe the economy will begin to dip, and PayPal having a higher Beta to one, will have a stronger sensitivity to this reaction. 8. PayPal does not have any debt, therefore there are no fixed income instruments to evaluate. 9. 10. Bloomberg Certificate on Attached PDF File
Pay Pal Evaluation
Course: Investment Anly/Portfolio Mgt (FIN 672)
University: American University (USA)
