PayPal will officially be spun off from eBay on Friday and begin trading on the Nasdaq on Monday under the ticker "PYPL." After that, eBay will be on its own, but for now, eBay can still reap the benefits from PayPal revenue.
In April, eBay reported first-quarter earnings of 77 cents a share on revenue of $4.45 billion, exceeding analysts' average estimate of 70 cents a share on $4.42 billion in revenue. For the first time ever, eBay's Marketplace revenue was surpassed by PayPal's revenue, hinting that eBay could have a tough time post spinoff. PayPal brought in $2.11 billion, and Marketplaces brought in $2.07 billion.
Plus, eBay and analysts alike expect to still see the negative impact of last year's security breach, troubles with Google (GOOG) - Get Report (GOOGL) - Get Report algorithm changes and foreign-exchange headwinds. And June data from e-commerce services provider ChannelAdvisor (ECOM) - Get Report show that third-party sales on eBay rose 7.2% year-over-year, compared with the e-commerce industry's average growth of 15% and Amazon's (AMZN) - Get Report 26% growth.
"The long-term concern is (eBay's) still not good enough from an e-commerce share," said Scot Wingo, executive chairman of ChannelAdvisor. "Vendors like us and the sellers we work with are worried about eBay and the slump they've been in."
Wingo is also hoping to get more clarity from eBay on its post-spinoff strategy. His clients are concerned about mixed messaging from eBay and are confused about whether eBay is focusing more on individual, small sellers or large merchants. Wingo is also hoping to see stronger active user growth. Last quarter, eBay's user base rose 8.2% year-over-year to 157 million active users, but that growth fell from 11% in the fourth quarter of 2014.
In April, San Jose, Calif.-based eBay projected for its second quarter that revenue would reach $4.4 billion to $4.5 billion, with earnings of 71 cents to 73 cents a share.
Analysts are estimating revenue of $4.5 billion with earnings of 72 cents a share, according to Thomson Reuters.
The Internet e-commerce giant is also expected to share news about its plan to spin off its enterprise business. In the past, eBay has mentioned this plan in previous calls, but has yet to announce any specific timeline or buyer. Private-equity firm Thomas H. Lee Partners is reportedly the front-runner to purchase the business from eBay, according to Bloomberg. Thomas H. Lee Partners declined to comment.
PayPal, though, is expected to show strong growth. Cantor Fitzgerald analyst Youssef Squali estimates that transaction revenue rose 14% to $1.98 billion in the second quarter. Squali initiated coverage of PayPal with a buy rating and a price target of $45.
"PayPal's large addressable opportunity both on and offline, strong brand and leading position online, and our expectation for mid-teens growth over the next 3-5 years are key reasons why we find the shares compelling at current levels," he wrote in a research note on Monday.
Ebay declined to comment for this article.