PayPal Gaining on Bill Me Later and eBay Partner Sites

by Trefis Team
+15.78%
Upside
23.81
Market
27.57
Trefis
EBAY
eBay
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The number of accounts on PayPal has been growing substantially, which signifies eBay’s (NASDAQ:EBAY) concerted efforts to integrate PayPal into its “Marketplaces” segment and forge strategic relationships with a diversified group of leading online commerce portals like Blue Nile. We expect double-digit growth in the coming years both in the US and international markets.

While we expect the total number of PayPal accounts to rise to 150 million by 2013, Trefis members predict a number of 250 million, translating into an upside of 10% to our price estimate for Ebay stock. We estimate that eBay Marketplaces accounts for almost half of eBay’s stock value while PayPal contributes about 20%

We currently have a Trefis price estimate of $31.33 for eBay’s stock, about 2% above the current market price of $30.60.

Higher PayPal TPV on Ebay Marketplaces and Third Party Platforms

PayPal increased its Total Payment Volume (TPV) from eBay’s marketplaces from $24 billion in 2006 to around $31 billion in 2009. [1] We expect the TPV from eBay marketplaces will rise as eBay continues to integrate PayPal into its adjacent marketplaces platforms like Shopping.com and Rent.com.

PayPal’s TPV penetration of third party merchants is also increasing steadily. PayPal has already forged relationships with leading ecommerce websites like Blue Nile, Southwest Airlines, Barnes & Noble, and Toys R US. We would expect growth in this segment to continue as eBay focuses more on small and medium businesses, as well as proprietors.

Other Services to Drive PayPal Growth

We believe that eBay’s focus on buyer protection programs will increase and enhance PayPal use on the platform. Another PayPal service that has gained rapid adoption recently is “Bill Me Later” which lets consumers make purchases online and make payments later. As per the company’s Q2 2010 earnings results, PayPal’s mobile payment volume in the first six months of 2010 was double the volume for all of 2009, indicative of increasing use of PayPal’s mobile phone app.

Member Forecast

The Trefis community predicts that the number of accounts on PayPal will increase from 114 million in 2010 to 250 million by 2013, compared to the baseline Trefis estimate of an increase from 93 million to 150 million during the same period. The member estimates imply an upside of 10% to the Trefis price estimate for eBay’s stock.

Our complete analysis for eBay’s stock is here.

Notes:
  1. Reported by the company []
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