An Unexpected Winner in Mobile Commerce
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The recent Cyber Monday shopping phenomenon served as a reminder of the powerful increase in online consumer spending. Numerous reports from eCommerce leaders such as comScore and ChannelAdvisor indicate this year’s online shopping season beginning on November 23 is off to a record start. According to a November 25 press release from comScore, online sales on Black Friday exceeded the $1 billion mark for the first time, representing the largest day in online spending during 2012 and a 26 percent increase from Black Friday 2011.
Clearly, Amazon (NASDAQ: AMZN) comes immediately to mind as the primary beneficiary of this trend, however when I reviewed data containing the traffic and sales mix over the past weekend, it is evident that a greater percentage of online orders is coming from smartphones and tablets in comparison to traditional desktop and laptop computers. According to ChannelAdvisor, a privately-held e-commerce solutions provider that includes Amazon and eBay (NASDAQ: EBAY) sellers among its customers, mobile traffic represented 36.9 percent of total traffic on Thanksgiving, compared to only 19.2 percent of total traffic for Thanksgiving during calendar year 2011. This represents a 92 percent increase in year-over-year mobile usage.
Consider the following quote from ChannelAdvisor CEO, Scot Wingo: “For the holiday so far, customers’ mobile traffic is trending toward nearly 40 percent of their overall traffic as compared to non-holiday periods, when mobile traffic averages about 25 percent of total traffic. I suspect that when the dust settles, the entire retail ecosystem will be rethinking and reprioritizing their mobile efforts.”
Here are five reasons why the eBay / PayPal business is the best method to play the growing mobile payments revolution:
- According to the official PayPal Blog, PayPal experienced an astonishing 196% growth in mobile payment volume for Cyber Monday 2012 in comparison to Cyber Monday 2011. The statistics released on the official blog were reaffirmed by PayPal President David Marcus at a meeting with reporters in San Francisco.
- eBay announced in August an agreement with Discover Financial Services (NYSE: DFS) to bring PayPal as a new payment method to millions of brick-and-mortal retail stores nationwide where Discover cards are already accepted. Customers will be able to use their mobile phone number and PayPal personal identification number (PIN) in order to make payment. Citigroup has estimated that the PayPal deal could boost Discover’s revenue by more than 5 percent.
- During its Third Quarter earnings call on October 17, eBay cited international expansion as a significant opportunity for the Company, and it expects the number of registered users on its eBay Marketplace websites to double over the next three to five years, keeping pace with the growth of internet users worldwide.
- eBay has publicly stated it expects to process more than $10 billion in mobile transactions this year through its eBay mobile apps, more than double the total volume of transactions the Company processed during calendar year 2011.
- After eBay’s strong Q3 earnings release, Stifel Nicolaus raised their price target on the stock from $50 to $60, citing strong execution and growth opportunities in mobile (both within eBay and PayPal). JP Morgan also raised their price target on the stock from $50 to $56 and reiterated their Overweight rating.
In conclusion, although Fool readers should recognize there are multiple beneficiaries of the ongoing mobile revolution, it appears at present that the eBay / PayPal business offers plenty of upside for investors over coming years. eBay, Inc. operates its fiscal year on a calendar basis and will release its Fourth Quarter 2012 earnings on Wednesday, January 16, 2013 after the market close.
Thanks for reading, and consider subscribing to my posts if you believe the developing trend in mobile is here to stay.
johnmacris has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services recommend Amazon.com and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!