Q: Looking at the chart of Propel. Since June 2024 consistent new monthly highs (of course with profit taking pull backs). But since the early November highs, the trend has changed, lower highs etc. this looks like a topping pattern to me. (I would say if it cannot break 40 very soon it is time to get out). While, of course, there can be many reasons for investors losing interest in a stock, the timing of the apparent reversal with the U.S. election seems too coincidental. May I ask as to whether 5i is aware of anything in the Propel business model which could be negatively affected by the Trump election? I am thinking maybe tariffs and their effect on interest rates etc.
Thanks as always
Neil
Thanks as always
Neil
5i Research Answer:
Tariffs might increase inflation, and inflation could increase interest rates, which in turn could hurt financial companies. But this would be a multi-year process, we think. We think the more likely issue here is that Trump has discussed capping credit card rates at 10%, and this has raised investor concerns that other interest rates will be capped. At 10%, companies like PRL would essentially make no money, due to the much higher degree of losses in the sub-prime business. We highly doubt credit card rates would be capped that low, and the likelihood of caps extending to other areas is 'probably' even lower. But........the new administration is going to cause uncertainty across lots of industries.