EBAY Stock Price Soars on Earnings Beat, PayPal Dominance

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Shares of eBay Inc (NASDAQ:EBAY) soared in early trading on Thursday after reporting a first-quarter earnings beat that reaffirmed PayPal’s dominant position as a payment platform. With PayPal set to spin off from eBay later this year — and with a standalone PayPal worth $39/share of EBAY stock — PayPal’s progress was one of the bigger stories going into earnings.

EBAY Stock price Earnings Beat PayPal

The EBAY stock price exploded as much as 5% higher on the news, helped along by a number of bullish analysts raising their price targets.

EBAY: Quarterly Highlights

Revenues came in just above consensus estimates, at $4.45 billion versus the $4.44 billion Wall Street expected. But EBAY stock’s adjusted earnings per share in the first quarter was 77 cents, topping consensus estimates of 71 cents by more than 8%. The pleasantly surprising eBay earnings were driven by higher margins that resulted in part from a 7% reduction in eBay’s workforce.

But again, PayPal was the main story here. For the first time, PayPal revenues exceeded those from eBay’s Marketplace; while PayPal revenue of $2.11 billion was up 14% year-over-year, Marketplace revenue fell by 4% to $2.07 billion.

The slumping Marketplace revenue — which will be the primary catalyst for EBAY stock when it trades as a standalone company after the spinoff — also underscored the massive influence wielded by Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL), as eBay was demoted in Google Search results and now must make concerted efforts to regain its footing.

CEO designate Devin Wenig told Bernstein analysts Carlos Kirjner, Andrea Rosso and Ben Betcher that it will be a multi-year process to improve SEO results; the research firm had expected the Google Search problem to be mostly cleared up by later this year or early 2016.

On the other hand, Bernstein sees an encouraging resilience from PayPal, which is seeing more intense competition each day. As long as PayPal is a part of EBAY stock, that’s good for shareholders, who have legitimate concerns about Apple Inc. (NASDAQ:AAPL) and the emergence of Apple Pay.

That’s not the only competition PayPal faces, as InvestorPlace contributor Richard Saintvilus noted in his earnings preview for EBAY stock:

“…other mobile payment options from Square, Intuit Inc. (NASDAQ:INTU) and Google Inc are credible threats. And that Facebook Inc (NASDAQ:FB) recently unveiled payment capabilities within its messaging app is another threat.”

Bernstein, however, increased its target for the EBAY stock price from $68 to $73, largely due to the strength in PayPal. It dismissed concerns about competitive pressures on PayPal’s platform, saying:

“… payments per user accelerated to a level not seen since 3Q12, showing that presumptive new competitors, including Apple Pay, have not had any significant impact on PayPal’s trajectory.”

Cantor, Barclays, and Wedbush analysts also boosted their EBAY stock price targets to $73, $68 and $60, respectively.

With the company expected to continue buying back stock going into the PayPal split, EBAY stock continues to look like a solid bet after its first-quarter earnings beat.

As of this writing John Divine was long shares of GOOG stock, GOOGL stock, and AAPL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/04/ebay-stock-price-soars-earnings-beat-paypal-dominance/.

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