eBay’s (NASDAQ:EBAY) stock price has risen by almost 80% from its January 2012 levels of ~$30 to ~$54 currently.  The growth was driven by the strong performance of its marketplace business coupled with the outstanding growth of PayPal. This growth relies heavily on the popularity of eBay’s mobile app suite which crossed the 100 million downloads threshold in September. 
The popularity of the eBay app suite can be gauged from the fact that 25 million of these downloads came in the preceding six month period. The company expects to transact $10 billion in mobile volume in 2012, twice that in 2011. With mobile commerce growing from a $3.4 billion market in the U.S. in 2010 to a projected $119 billion across the globe by 2015, the company is well poised to reposition itself as a significant competitor to Amazon’s dominance of the e-commerce universe. 
Traditionally Q4 growth has outpaced other quarters on a sequential basis. Below we take a look at the factors that defined eBay’s performance in 2012 as well as our expectations from Q4 results scheduled to be released on January 16th.
Marketplaces Growth To Complement That Of PayPal’s
Marketplaces contributes slightly more than half of eBay’s total revenues and nearly half of our $50 price estimate. During the third quarter, marketplaces’ total gross merchandise volume including vehicles increased to more than $18.3 billion, growing at about 9% year-over-year. The number of active users grew 10% year-over-year to 108 million, the fastest growth since 2007. Traffic from mobile devices was the major contributor within marketplaces with 800,000 new users making purchases on eBay mobile during Q3.
With sellers now listing 2 million items per week from their smartphones on eBay and the quarter spanning the holiday season, we expect the gross merchandise volume and the number of active users to continue the strong growth from the third quarter.
The United States contributes ~48% of total eBay revenues and our expectations are backed by the company performance in the country during the holiday season. It reported ~150% year-on-year growth in mobile transaction volumes during Thanksgiving, Black Friday and later in December.   The traditional retail calendar seems to be reshaping itself with holiday shopping surge on mobile devices occurring later than Cyber Monday and Black Friday.
The company’s mobile penetration should help it maintain its growth rate over and remain on top of the changing retail calendar over the coming years. One in three global purchases on eBay involve a mobile touch point, and the growing popularity of mobile devices as Internet access points could see the ratio go up in the coming years. 
PayPal To Lead From The Front
PayPal accounts for about 40% of eBay’s revenues and about 35% of our price estimate. Revenues from the division have grown at about 25% during 2012 with the international business outpacing the overall growth.  International business accounts for slightly more than half of PayPal’s total revenues. With the service still having a limited international presence, we expect the international business to be the major contributor in the coming years.
The division seems to have outgrown its dependence on eBay with Total Payment Volume on eBay constituting just 33% of the overall Total Payment Volume. This has been made possible by PayPal expanding its presence offline through PayPal Here devices and a tie-up with Discover Financial Services. We will look for the growth in PayPal’s offline presence and expect it to define the segment’s growth in the coming years.
The number of active accounts on PayPal jumped 14% to 117 million, and we expect it to reach nearly 121 million by the end of 2012. The holiday season saw PayPal mobile payment volume growing at about 200%.    The company expects to do over $10 billion of mobile payments volume in 2012.
The growing popularity and adoption of PayPal Mobile bodes well for the company and will support its growth outlook.
A great performance in Q4 2012 will lead us to revise our $50 price estimate for eBay which is in line with the market price.Notes:
- eBay Inc., Google Finance, January 2013 [↩]
- Millions of Reasons eBay is Driving Global Commerce – Anytime, Anywhere, eBay, September 2012 [↩] [↩]
- Black Friday: eBay Mobile Sees 153% Growth in Mobile Transacted Volume, eBay Inc, November 2012 [↩] [↩]
- Mobile Momentum at eBay Inc. Continues: Dec. 9 Marks eBay’s Biggest Mobile Shopping Day Ever; PayPal Delivers Second Biggest Mobile Day in 2012, eBay Inc, December 2012 [↩] [↩] [↩] [↩]
- PayPal Q3 2012 Fast Facts, PayPal, November 2012 [↩]