TOP 3 most traded CFD stocks of the week: PayPal, Bank of America, Ferrari NV

The summer months tend to be slower in terms of trading volume, but economic results bring increased volatility to the markets, which traders are looking to take advantage of. We bring you a summary of the top 3 most traded stocks at Purple Trading for the first week of August. What's behind their popularity and what's the outlook for the future? You can read all this in today's article.

PayPal (+9.53%) - low expectations are the basis for success

PayPal shares have literally been under fire since the beginning of the year, having erased over half of their value. The comparison with the all-time high is even sadder, as the current price is 70% lower. PayPal has paid for its unprecedented success during the coronavirus when the stock appreciated by hundreds of percent thanks to the boom in online shopping. However, the company did not adequately prepare for the subsequent slowdown in activity after the coronavirus and, as with Netflix, investors paid the price. In addition, PayPal officially lost its partnership with eBay, which replaced it with Dutch company Adyen. The past week has been similarly chaotic from a company perspective as the rest of the year and so it is no surprise that PayPal was the most traded CFD stock in Purple Trading last week.

Earnings, a famous outside investor and a share buyback. That's how you could sum up PayPal's last week. The company's second-quarter financial results themselves were nothing short of miraculous - revenue was up 9% year-over-year to $6.81 billion, while profit fell 21% to $1.08 billion. Earnings per share were 93 cents. PayPal thus slightly beat analysts' expectations on both metrics. However, the total number of active accounts, total payment volume and number of transactions are equally important indicators for payment companies. However, the growth of all these indicators has been slowing down in the last five quarters. Moreover, the payment intermediation market is a highly competitive environment.

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Chart 1: PayPal shares on the MT4 platform on the M30 timeframe along with the 50 and 100 day moving averages

PayPal has made some pretty big mistakes in its history that investors don't forgive. In particular, setting targets that are too big and then failing to meet them. For example, the company expected to double the number of active accounts between 2020 and 2025. However, it abandoned this goal rather quickly. Similarly, the outlook for future revenues and profits has disappointed investors on more than one occasion. PayPal has thus preferred to take the path of lower expectations, which so far seems to be paying off. Over the past month, the stock has gained 30%, thanks largely to a USD 2 billion stake in PayPal bought by hedge fund Elliott Management.
However, the outlook for the next few months does not speak too positively and so the growth from last month may be overly optimistic. Indeed, there are several known and unknown threats on the horizon. In May, PayPal's long-time CFO John Rainey left the company, and the company's business is not well served by rising interest rates in the US and high inflation. In addition, the stock price to earnings (P/E) ratio is over 50, which is still high. On the positive side, at least the share buyback can be expected to reach USD 4 billion this year. Thus, the factors causing volatility seem to be still enough and PayPal will undoubtedly remain attractive for speculators.

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Bank of America (+1.01%) - the darling of the best

Shares of one of the largest US banks may be a surprise entrant on the list of the most traded CFD stocks. This is because Bank of America did not experience any significant volatility nor did it have any economic results in the past week. Even so, Bank of America shares may be of interest to value investors and speculators alike. The bank's stock is currently hovering near a one-year low and has written down over a quarter of its value since the beginning of the year. With a current P/E ratio of around 10 and a dividend yield of over 2.5%, it may be an interesting choice for value investors. Moreover, Bank of America is also a significant component of Warren Buffett's portfolio and famous hedge funds.

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Chart 2: Bank of America shares on the MT4 platform on the M30 timeframe along with the 50 and 100 day moving averages

How have the last few weeks been from Bank of America's perspective? In the second half of July, the company reported earnings results that pleased investors quite a bit. Revenues grew 6% to $22.8 billion and profits reached $6.25 billion, which was a big deterioration compared to last year (due to regulatory costs), but the company still beat analysts' expectations.
The coming months promise volatility among banks as well. Rising interest rates are rather positive for banks as they can earn more interest on the loans they issue. However, the possible recession, which is constantly being talked about, is negative. In a recession, the banking sector is one of the hardest hit, as people find it difficult to repay their loans. So Bank of America is worth keeping an eye on.

Ferrari NV (+1.51%) - when you do better on the markets than on the track

The only non-American title on the list of the Purple Trading’s most traded stocks is the famous carmaker Ferrari. Ferrari's performance in Formula 1 probably brings tears to the eyes of its fans, but fortunately this is not the case in the stock markets. Ferrari shares are down less than 9% since the start of the year, a very respectable performance compared to most car companies. Moreover, let's not forget that luxury car companies are highly cyclical companies that could be significantly damaged by a recession. However, all is well with Ferrari, as evidenced by the financial results the carmaker published last week.

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Chart 3: Shares of Ferrari NV on the MT4 platform on the D1 timeframe along with the 50 and 100 day moving averages

Ferrari has had a record quarter. It's not just the number of bad strategic decisions made by the Formula 1 team, but also the number of cars sold. The company's sales and profits are up more than 20% year-on-year and the company has also increased its forecast for the rest of the year, which is quite unprecedented in the current climate. Ferrari delivered 3,455 new cars in the second quarter of the year - 29% more customers making their dreams come true year-on-year. The most popular models are the eight-cylinder Portofino M and the F8. Ferrari also started production of the new 296 GTB.
However, Ferrari hasn't pulled the biggest ace out of its sleeve yet - it's the planned Purosangue SUV, which is due to start production next year. This model's success is almost certain, with rival Lamborghini having already sold over 20,000 units of the Urus SUV since its launch, making it the carmaker's best-selling model. However, despite all the positives, a potential recession could be a big risk for Ferrari shares and a look at the stock's performance since the start of the year clearly shows that there is increased volatility here too.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.60 % of retail investors lose their capital when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.