Morningstar Rating

Stock Research and Analysis

by R.J. Hottovy, CFA

Bulls Say

With more than half of the world's Internet users coming from developing markets, eBay and PayPal have ample global growth opportunities.
Although management has been quick to downplay a stand-alone eBay or PayPal as acquisition candidates, we believe there are potential consolidation or asset sale partners for both (Google, Alibaba, and Microsoft, as well as a host of smaller payment/technology firms) that could strengthen their respective network effects.
Potential capital-allocation changes (share repurchases and dividends) could make a stand-alone eBay an attractive investment. Read more 

Bears Say

EBay's Marketplaces are still feeling the effects of the May 2014 data breach/password reset issues and changes in Google's search engine algorithm, which could increase user acquisition costs, deter new sellers, and signal a weakening network effect.
EBay faces competition from Amazon, Apple, and Google, which offer competing marketplaces, online/mobile payment services, comparison shopping sites, and ad search engines.
As a stand-alone entity, PayPal may face increased regulatory scrutiny, including potential investigations into its PayPal Credit division. Read more 

Management

There is no change to our Exemplary stewardship rating following plans to separate eBay and PayPal, as we believe both businesses will be led by strong management teams upon their separation. In particular, we're intrigued by the appointment of Dan   Read more 

Profile

With almost $83 billion in gross merchandise volume in 2014, eBay facilitates almost 8% of the $1 trillion-plus global e-commerce market. PayPal's total payment volume of   Read more 

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