Ebay Solves Mobile!

by Tom Taulli | January 17, 2013 1:05 pm

The mobile market is a funny (well … frustrating) thing. In the past few years, the markets for smartphones and tablets have soared. That’s been great for the makers of said technology, but a host of companies — including Facebook (NASDAQ:FB[1]) and Zynga (NASDAQ:ZNGA[2]) — haven’t been able to turn a commensurate boost in mobile traffic into sizable profits.

Not eBay (NASDAQ:EBAY[3]).

The online auctioneer and PayPal parent apparently has cracked the mobile code. Last year, eBay generated an impressive $13 billion in mobile payments[4], which was well above its forecast of $10 billion. The company says it will exceed $20 billion in 2013.

Mobile growth helped to juice eBay’s fourth-quarter results, which saw sales jump 18% to $3.99 billion. Yes, profits did fall from $1.98 billion to $751 million during this period, though keep in mind that last year’s figure was impacted by the sale of Skype to Microsoft (NASDAQ:MSFT[5]).

To bolster mobile growth, eBay has focused on deep integration with its various properties. For example, PayPal saw a 24% increase in sales to $1.54 billion, thanks in part to a 15% improvement in active accounts, which now total 123 million.

PayPal, an online payment service, also has been moving aggressively into the brick-and-mortar retail space. It has struck deals with Home Depot (NYSE:HD[6]), Foot Locker (NYSE:FL[7]) and Jamba (NASDAQ:JMBA[8]), as well as a blockbuster pact[9] with Discover Financial (NYSE:DFS[10]) that will make PayPal available at millions of merchants.

Ebay’s traditional marketplaces business also is seeing nice growth, with some credit going to a redesign of the interface. For Q4, sales jumped by 16% to $2.05 billion.

On eBay’s earnings call, CEO John Donahoe set forth a compelling vision. Despite mobile’s quick adoption — and his belief that it’s the “new normal” for e-commerce — he still thinks mobile is in its early stages, and that sets up eBay well for long-term growth.

The only thing raining on eBay’s parade — at least as far as potential new investors go — is its past performance. EBAY shares have run up 78% in the past year, which has added a little froth to current prices (EBAY currently trades at 18 times earnings, which appears fair but not a screaming value).

I expect EBAY’s ascent to continue at a more muted pace. But it will continue.

Tom Taulli runs the InvestorPlace blog IPO Playbook[11], a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook[12]” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders[13].” Follow him on Twitter at @ttaulli[14]. As of this writing, he did not hold a position in any of the aforementioned securities.

Endnotes:
  1. FB: http://studio-5.financialcontent.com/investplace/quote?Symbol=FB
  2. ZNGA: http://studio-5.financialcontent.com/investplace/quote?Symbol=ZNGA
  3. EBAY: http://studio-5.financialcontent.com/investplace/quote?Symbol=EBAY
  4. generated an impressive $13 billion in mobile payments: http://www.bloomberg.com/news/2013-01-16/ebay-sales-beat-estimates-as-donahoe-pushes-mobile-sales.html
  5. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  6. HD: http://studio-5.financialcontent.com/investplace/quote?Symbol=HD
  7. FL: http://studio-5.financialcontent.com/investplace/quote?Symbol=FL
  8. JMBA: http://studio-5.financialcontent.com/investplace/quote?Symbol=JMBA
  9. a blockbuster pact: http://investorplace.com/2012/08/discover-strikes-a-deal-with-paypal/
  10. DFS: http://studio-5.financialcontent.com/investplace/quote?Symbol=DFS
  11. IPO Playbook: http://investorplace.com/ipo-playbook/
  12. How to Create the Next Facebook: http://www.amazon.com/gp/product/1430246472/ref=s9_simh_gw_p14_d0_i1?pf_rd_m=ATVPDKIKX0DER&pf_rd_s=center-3&pf_rd_r=0GRB6ZMCTYDZVNG7Q7NV&pf_rd_t=101&pf_rd_p=470938811&pf_rd_i=507846
  13. High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders: http://goo.gl/pR2F3
  14. @ttaulli: https://twitter.com/ttaulli

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