Shares of eBay Inc. (EBAY, Financial) rose by 3.62% in the past week and 5.24% for the past 4 weeks. For the past week, the counter has outperformed the S&P 500 by 1.56% and the outperformance increased to 1.34% for the past 4 weeks. eBay Inc. is trading with a trailing 12 month P/E multiple of 1129.40 and an estimated forward P/E multiple of 16.58. The stock has an estimated 5 year annual growth of 10.88% and a PEG multiple of 103.81. eBay Inc. has moved to higher grounds in terms of shares where they have gained 1.735 points or 3.1698%. There has been a drop of 11.4% or 1,930,760 shares in short positions.
With stock price moving in the positive direction, the company is speeding its plans to spin off PayPal (PYPL, Financial) as decided earlier towards the later part of 2014. What this spinoff means to eBay and what are the rumors being heard about eBay’s upcoming future- let’s read further to unravel the entire story.
eBay and Paypal spinoff
Earlier this month, eBay had initiated the layoff program and it proved to be an outcome to the decision of spinning off PayPal as a separate entity. But the final decision of spinoff will be taken in the second half of 2015. Jobs to be scrapped as a part of Layoff program will be around 2000. Jobs which will be scrapped are those which don’t contribute in the growth or which are ineffective in the growth of the company. As of now, there are no details revealed regarding the termination of the employees from the company. Currently eBay is moving towards the development for its own payment technology after the spinoff with PayPal and is keen in recruiting experts from various tech companies like Apple (AAPL, Financial). RJ Pittman was recently appointed as a Chief Product Officer, as he has previously worked with Apple as a top - notch Executive in Apple’s e - commerce and payment division.
Though it is crucial for eBay to develop the in-house payment capabilities, the company will try to maintain its deep working relationship with PayPal even post the spinoff process. PayPal is also planning to curtail certain jobs as they were unable to meet the standards set by eBay.
PayPal’s growing online money transfer business, Venmo, would not be affected by this layoff program as it has received positive responses from the users at phenomenal rates, and PayPal’s management has great expectations linked to this application. News sources recently confirmed on February 12 that eBay will pay $5 billion in cash to PayPal post the spinoff.
This information piece was revealed by CFO of eBay Bob Swan during a meet at Goldman Sachs and Internet Conference on last Wednesday. He further added- “eBay will direct its efforts toward a much narrower market, wherein more emphasis will be placed on 40% of the buying public interested in attractive deals.” He expressed his opinion that under the leadership of the new CEO Devin Wenig, eBay would work towards meeting the needs of high-end consumers, who are normally inclined towards buying of pricey items.
Will eBay be acquired in the long run?
Analysts globally are speculating on eBay’s future and have indicated that the Mountain View based company; Google (GOOG, Financial) might as well love to gobble it as it has already shown interest in expanding its base in the online shopping line of business. Also as Google’s cash reserves have just accumulated down the years it might invest in buying eBay this year. Numerous acquisitions have been previously done by Google which range from acquiring the smart home device maker Nest Labs in 2013 to Motorola’s (MSI, Financial) handset unit which it later sold off to Lenovo (LNVGY, Financial). As eBay will become a less popular player in the online space after the spinoff of PayPal, it might as well agree to be acquired by a tech company like Google. In fact, the acquisition by Google could serve as a first step forward in reaching out to the online masses and growing its foothold in the ecommerce domain.
According to a recent report, there could be three contenders interested in purchasing eBay – Google, Alibaba (BABA, Financial) and Amazon.com, Inc. (AMZN, Financial). Of the three potential candidates, the focus is on Google and Alibaba, and rumors have suggested that either of them will be the best bidder for eBay.
Moving ahead
After the spinoff of PayPal, if eBay gets acquired by any of three contenders in the acquisition spree, it would be the best news available to eBay’s investors. All eyes are busy watching the upcoming future of eBay which will give better insight onto how the company would prosper in the ecommerce space as an online auction giant after its association with PayPal comes to a final close. So, let’s stay tuned.
