eBay’s (NASDAQ:EBAY) results were positively impacted by strong growth in its payments segment PayPal as we discussed in a recent note. The company also enjoyed a large top-line upside to its GMV (Gross Merchandise Volume) and TPV (Total Payment Volume) metrics for the last quarter, which grew by 10% and 29% respectively.  Looking ahead, we expect PayPal’s contribution to eBay’s stock to increase, standing at around 23% by our current estimates.
PayPal Steadily Shedding Off eBay Dependence
2012 should largely see PayPal growing as a strong and standalone business entity for the company. According to eBay’s recent Q4 earnings release, PayPal’s TPV generated from eBay transactions was 34% of is total TPV in 2011, compared to around 38% in 2010. Going forward, this percentage will decrease further, especially as the segment shifts its focus to mobile payments. PayPal is already planning to extend its pilot tests for its in-store and POS (point-of-sale) payment technologies.  In short, merchant-based payments would increasingly become dominant in driving PayPal’s revenues.
We are in the process of updating our estimates which are currently around 25% above the current market price. The revision to the model has been made based on our change in revenue and margin forecasts for Marketplaces and PayPal, as well a change in the company’s net cash/debt position.
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