EBay’s Fortunes Bound to PayPal Prosperity
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Are these the last few steps in EBay’s bullish stretch? No they are not. My opinion in a way collides with one underlying unwritten law- a bullish stretch always has a cliff at some point. Share price doesn’t rise for ever and it is the canny investor who pulls out before the dreaded fall. This is not a mere theory from your local book shop. It actually happened to EBay (NASDAQ: EBAY) back in 2009 when the share price nosedived to lows of about $10. This was of course after previous commending performances.
The following table gives a sneak peek of some of the crucial figures
|
|
2009 |
2010 |
2011 |
|
Revenue |
8.72B |
9.15B |
11.65B |
|
Net Income |
2.3B |
1.8B |
3.2B |
|
Diluted Earnings per share |
1.83 |
1.36 |
2.46 |
Although these aspects do not conclusively indicate the direction of a model stock, they more often than not provide a somewhat accurate outlook.
From the figures, it is quite evident that there was a dip in the 2010 performance. This was a possible effect of the eroded confidence levels in stakeholders after the upsetting 2009 performance.
Currently, the stock is doing well-quite well for that matter. Any level minded investor knows that this bullish cloud invites two extreme possibilities. On one end, it may be an indicator of further growth and prosperity. On the flip side, it may be the peak of a very tall mountain. In other words, it may be the beginning of a sharp fall.
In person, I believe that the odds favor EBay. The bullish vibe is not about to fade away. This is especially so after considering PayPal’s continued prosperity in online payments. PayPal is the primary payment service that underlies EBay transactions. This means that the two have intertwined destinies. Basic economics will actually cast them under the umbrella of complementary goods. This, therefore, means that the two will typically rise together.
One question however looms, how strong is the PayPal-EBay bond? Will it be able to hold in the current dynamic internet industry? Let’s take a look.
Of PayPal and TiVo
As a child, you used to watch TV and brainstorm on ways to remove the new featured bike directly from the TV set. With time, you realized that this was not possible and started visiting stores or making online orders. However, picking a product straight from the TV screen may soon become possible - of course not in the literal sense.
PayPal and TiVo (NASDAQ: TIVO) have joined hands in an attempt to come up with a peerless service that will allow viewers to enjoy an on-the-spot purchase of products featured in advertisements. The service which is expected to kick start as the curtains close on 2012 will revive a lot of prospects at the EBay camp.
Although the PayPal enabled adverts will be available for other traders that use PayPal, there is a possibility of EBay stealing the show from other traders. This is primarily because EBay appeals to most U.S consumers. TiVo mainly casts its nest over the American market which in turn drives back most of the consumers to EBay. In the event that EBay fails to fully utilize this opportunity (which I believe it won’t), it will still bask in the glory of PayPal’s increased market share. This is the beauty of complementary products. My friends in the biological incline would call it a symbiotic relationship. Whatever you call it, one thing remains clear - PayPal and EBay will share the glory.
Still on PayPal
Other concerns that seem to have weighed in on banks are PayPal’s accelerated efforts. The online payment behemoth is the preferred option for close to 48% of consumers who are interested in digital wallets. This is according to a survey conducted by Carlisle & Gallagher Consulting Group. The survey in particular points out that 80% of digital wallet users would opt for PayPal as their primary banking service if it provided full functionality.
Although this may not pass out as a real threat for banks at the moment, it shows that PayPal has positive growth prospects lined up in the future.
Conclusion
The bond between EBay and PayPal will hold. The former is on a long bullish stretch while the latter is providing the anchorage and support. You may be tempted to sell and make your profit- a good call. However, hold a little bit longer for bigger returns. Better days are just around the corner.
muhammadbazil has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend 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.If you have questions about this post or the Fool’s blog network, click here for information.
