Paypal Holding Up eBay Inc (NASDAQ: EBAY)’s Gains

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Yesterday eBay Inc (NASDAQ: EBAY) reported its Q2 second quarter financial report for the 2014 fiscal year. The company’s EPS was $0.69, which rose ahead of analysts’ predictions for $0.68. However, eBay only hit $4.37 billion in revenue, falling short of analysts’ expectations for $4.39. These two figures both fell within the range that the company provided previously.

Wednesday eBay’s stock price closed at $50.7. The price then rose 1.46 percent in after hours trading.

This quarter eBay’s revenue increased 13 percent year over year, to $4.37 billion. This growth in revenue was consistent with what the company has experienced in the past five quarters. Due to the acquisition of Braintree and the negative impact of foreign currency, eBay saw a natural growth rate in revenue of 10% – lower than the average revenue growth rate of the last five quarters of 14%.

The online auction company had a non-GAAP operating margin of 24.4%, a 190 point decrease from last year. This fall was due to cyber attack related expenses and more investment in the website’s appearance.

This decrease was offset by Paypal’s expanding transaction margin and favorable operating expense advantage. Paypal’s operating expenses made up about 45% of eBay’s revenue, mainly due to improved marketing spending.

eBay’s Marketplace Performance

The company’s marketplace revenue rose to $2.2 billion by 6 percent. 79.2 percent of the total revenue was made up of the transaction revenues. While the overall revenue for the company’s marketplace segment rose, transaction revenues fell by $5 million. International revenues made up roughly 61% of the total revenues in the marketplace segment.

eBay was also punished by Google, who took down some of eBay’s pages from Google’s search results. The pages that were taken off from Google’s search results are known are doorway pages, which are category or sub category pages that eBay created and optimized to as an SEO tactic and boost rankings in the search results.

The cyber attack and Google SEO controversy was brought to light in May of 2014, and significantly affected the company’s gross merchandise volume. eBay’s GMV dropped 0.21% from the last quarter. Due to lesser active buyer growth and lesser conversion rates, the United States GMV decreased 2.1% quarter over quarter. On the other hand international GMV increased 0.88%. In order to recapture customers, eBay put heavy investments in promotional endeavors, like coupons and incentives for sellers. As of now, the company has begun to see recovery in the segment.

Credit and Payment Segment

As for the payment segment for eBay, its revenues increased 20 percent year over year. 89.5 percent of these revenues were transaction revenues. The remaining percentage consisted of marketing services and others. International revenue made up roughly 51 percent of the total revenue. This increase was powered by increasing Merchant Services, including increasing growth from Paypal credit.

Paypal’s total revenue growth was 15 percent year over year, and its total payment volume increased 26% year over year. This increase was due to the expansion of Paypal’s globally sited merchant.

The company’s credit segment is still in its early developing stages. Features include the Bill Me Later product, whose TPV rose 34% year over year due to the integration of Bill Me Later on Paypal’s recurring subscription feature.

Additionally, Paypal also agreed with General Electric (NASDAQ: GE) to provide dual-branded credit cards, which would allow Paypal to grow their credit offering to merchants and consumers.

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  • les

    Paypal also has a LIMIT for people doing business (buying) on EBAY . If you buy MORE then 2500.00 of merchandise on your Credit Card but not establishing a PP account. Paypal/Ebay will stop you from buying on Ebay w WITHOUT establishing a Paypal account. So your future pruchases are limited by the EBAY/Paypal policies. Ebay is stabbing themselves in the foot with these policies..

    • les

      Btw that is not 2500.00 limit per year that is 2500.00 for the Lifetime of your Ebay account. So say you bought expensive items in the past on Ebay using your Amex/VISA/MC cards. for like a Watch; a generator and a jacuzzi in the past 5 years which totaled 2500.00. Ebay is saying for all your ‘future’ payments on Ebay you MUST establish a Paypal account or they won’t allow you to ‘purchase’ items. This is another reason why ebay/paypal losing business growth… and I am was a user since 1999. Ebay/PP policies are curtailing my use

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