EBay (EBAY) earnings came in higher than Wall Street expected on Thursday, sending EBAY stock as much as 4% higher in the last day before the PayPal spinoff.
EBAY stock is now up 16% in 2015, handily outperforming the benchmark S&P 500 index by about 14 percentage points.
Adjusted eBay earnings per share came in at 76 cents in the second quarter, 4 cents higher than analysts expected.
Unfortunately, EBAY stock whiffed on revenue, coming in at $4.38 billion vs. the $4.48 billion consensus figure … but that’s okay because nobody on Wall Street seemed to care.
Bye-Bye Enterprise, Hello Spinoff Central
Higher-than-expected eBay earnings weren’t the only thing sending EBAY stock higher today. The company is also selling eBay Enterprise, its in-house business that builds e-commerce websites for other, traditionally brick-and-mortar, retailers.
EBay Enterprise, which accounted for $300 million in revenue in Q2 — a number not included in the $4.38 billion revenue figure for the whole company — was bought by a group of private equity funds for $925 million.
While eBay earnings are driving EBAY stock higher today, current shareholders should (and probably do) know that eBay and PayPal will split up, trading as two separate stocks very soon.
On Monday, July 20, investors will be able to buy shares in both eBay as a standalone company (ticker still “EBAY”) and PayPal as a standalone company (ticker “PYPL”).
Side note: You can actually buy standalone PayPal Holdings Inc (PYPLV) stock and standalone eBay Inc (EBAYV) stock today, before PayPal shares are distributed to current eBay shareholders. (I bought some PYPLV myself yesterday). It’s a pretty rare situation, and one I explain in more detail here.
With that out of the way, let’s get back to eBay earnings, shall we?
Overall, revenue of $4.38 billion — which does not include eBay Enterprise revenue — was up 7% year-over-year. All of that growth was driven by PayPal, which saw payments revenue jump 16% year-over-year to $2.26 billion.
As for eBay and its Marketplaces revenue, they were down year-over-year … for the second straight quarter. Revenue of $2.12 billion was 3% less than the $2.17 billion it hauled in in the same quarter last year.
Again, we see EBAY stock being driven by PayPal.
Currency headwinds held back revenue growth in both divisions, but eBay was more adversely affected than PayPal. While 50% of PayPal revenues come from overseas, 59% of eBay’s come from abroad. Thus, as a result of the stronger dollar, PayPal’s 16% revenue growth would’ve been 19% in an FX-neutral environment, and instead of seeing eBay revenues fall 3%, Marketplaces revenues would’ve actually risen 5% year-over-year had it not been for the stubbornly strong greenback.
Bottom line? It’s the same story we’ve seen with EBAY stock for the last few years now: PayPal thrives as eBay struggles.
There’s good news, though — for the first time ever, you can buy stock in PayPal without buying its clumsy sibling eBay at the same time.
I have a feeling a lot of that will be going on next week when PYPL stock formally hits the markets.
As of this writing, John Divine was long shares of PYPLV. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
