☕️ GM Munchers! My wife just asked why I'm staring at PayPal charts on a Saturday instead of helping her organize the garage. I told her I'm "conducting financial research." She told me I'm "avoiding manual labour." We're both right, but only one of us is about to explain why a stock trading at 2015 prices might still be overvalued in 2026.

First things first, let’s review what’s happened with our January Google call, then we’ll dive into our February stock pick, PayPal.

📊 Google Recap: Patience Is a Strategy (Even When Nothing Happens)

Our January Call: We loved the stock. We didn't buy it.

At $313—near all-time highs—we outlined the bull case, ran the numbers, and said: "The risk-reward at $313 is 2:1. We want 4:1. We're watching, not buying. Our entry target is well below $300"

What Actually Happened:

Google went from $313 to... $318. Essentially flat.

Turns out waiting for a better entry wasn't just discipline—it was accidentally correct. Anyone who FOMO'd in at $313 is sitting on a 1.6% gain after a month of drama, volatility, and market-wide chaos.

We're sitting on cash, waiting for our setup. Same position. Zero regrets.

The Setup We're Still Waiting For:

Nothing's changed. The thesis is intact:

• Fundamentals: Still printing cash. $73.6B in annual free cash flow. P/E of 30—cheaper than Microsoft, laughably cheaper than Tesla.

• Buffett: Still a $4.9 billion shareholder. Still our safety net.

• Entry target: Anything below $300 provides a margin and safety and might make you look like a genius 5+ years from now.

• Current price: $318. Still not interested.

The Munch Take: We don’t pick stocks for the short term. What a stock does over a 30-day period is pure volatility and Google moving around 1% means nothing. Long-term, we love the company. Right now though, we only like the stock at it’s current price. We’ll keep waiting.

Legal disclaimer: Not financial advice. We're traders sharing our personal approach. Do your own research. Don't bet rent money on a newsletter.

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💀 PayPal ($PYPL): The Decade-Long Journey to Nowhere

You voted for it. We obliged. And honestly? PayPal's collapse is one of the most fascinating slow-motion disasters in modern finance.

Trading at $40—its exact 2015 IPO price—after a decade of going absolutely nowhere while the S&P 500 doubled. A stock that once hit $300 is now fighting to stay above its birth price. Let's do the autopsy.

🔍 Why PayPal Crashed 80% (The Simple Version)

Think of PayPal as a toll booth on the internet. For years, it was the only easy way to pay online. Then three things happened:

1. Apple Pay killed the button. People clicked "PayPal" because typing card numbers was annoying. Now you double-click your phone. Faster. Easier. Game over. PayPal's most profitable product—the branded checkout button—grew just 1% in Q4 2025. That's not a slowdown. That's a flatline.

2. The Covid hangover. 2021 was PayPal's golden age—everyone stuck at home, buying everything online. Investors assumed the growth was permanent. It wasn't. World reopened. Growth evaporated. Stock followed.

3. Making less money per sale. PayPal runs two businesses: the "PayPal Button" (high margin) and Braintree—the invisible payment tech powering Uber and Airbnb (low margin). Braintree's growing fast but keeps almost nothing as profit. So PayPal's processing more money while earning less. The worst kind of treadmill.

🏦 Fundamentals: Value Trap or Value Play?

🐂 The Bull Case:

• Dirt cheap valuation: Trading at 10-11x earnings. At this price, PayPal doesn't need to grow fast—it just needs to not die.

• The "Cannibal" play: Generates $6B+ in free cash flow annually and is aggressively buying back its own stock. Fewer shares = each remaining share worth more.

• Venmo: 90 million users and still largely unmonetized. New debit cards and crypto features could unlock a sleeping giant. Could.

🐻 The Bear Case:

• Melting ice cube: The branded button is losing share to Apple Pay daily. When the button dies, the main profit engine dies with it.

• Leadership chaos: CEO Alex Chriss just got replaced by Enrique Lores from HP. Third leadership change in recent years. "Turnaround CEO" is corporate code for "we have no idea what we're doing."

• Commoditization: Payment processing is becoming like electricity—everyone provides it, nobody charges a premium for it. PayPal's in a race to the bottom on fees against Stripe and Adyen. Races to the bottom have no winners.

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🥤 What Would Buffett Say?

Berkshire owns massive stakes in Visa, Mastercard, and American Express. Not PayPal. Here's why that matters:

"Where's the moat?" Visa and Mastercard are the highways money travels on. Nobody builds new highways. PayPal is just a car on that highway—and Apple Pay just built a faster car.

"Turnarounds seldom turn." Buffett's most famous rule about struggling businesses. With a revolving door of CEOs and a shifting strategy, PayPal looks exactly like the kind of turnaround he avoids religiously.

The Buffett verdict: Too Hard pile. He'd rather own the credit card networks that get paid regardless of whether you click PayPal or Apple Pay. So would we.

📉 The Chart: Still Falling

PayPal isn't building a base. It's not consolidating. It's just bleeding—red candles stacking like a Jenga tower mid-collapse.

Down 87% from peak. Recently crashed 15-20% in a single day after earnings. No support structure forming. No accumulation signals.

Just because it's down 87% doesn't mean it can't drop another 20%. Catching falling knives is how you lose fingers.

What we need to see:

• Price stops falling and builds structure

• Higher lows forming

• Actual accumulation—not dead cat bounces

🎯 The Munch Take: Interesting. Not Actionable.

Why we're watching:

• Valuation is genuinely cheap if the business stabilizes

• $6B in annual FCF and aggressive buybacks eventually create a floor

• Sentiment so negative that any good news triggers a violent short squeeze

Why we're not buying:

• Technicals are broken. No structure. Just bleeding.

• Fundamentals show decay, not turnaround. 1% branded checkout growth is a slow-motion death sentence.

• Opportunity cost. Capital tied up in a 12-24 month "maybe" story has better uses elsewhere.

What changes our mind:

• Price consolidates at $35-40 for 4-6 weeks showing real accumulation

• New CEO announces credible turnaround with actual specifics (not vague "innovation" buzzwords)

• Venmo or Fastlane shows measurable monetization

PayPal might be the most interesting value trap in the market right now. The bull case is real. The bear case is also real. And until the chart tells us the bleeding has stopped, we're watching from a safe distance.

Watchlist. Not portfolio.

Not financial advice. Do your own research. Don't bet rent money on a newsletter.

Happy Saturday,

Mr.Munch

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