eBay Inc (EBAY): A Good Long Term Story For Value Investors

The payment business remains the most attractive aspect of eBay Inc (NASDAQ:EBAY) stock amidst uncertainty and slow growth of its marketplace business. The expected spin-off of PayPal according to Wedbush analyst, Gil Luria, speaking on CNBC, is going to reduce eBay into a long term investment in terms of value generation due to its slow growth.

PayPal a one-time upstart has finally overtaken eBay Inc (NASDAQ:EBAY) core business in terms of revenue generation with brighter prospects as a standalone company. The payment arm has remained the fastest growing arm of the company with the Street reiterating it could emerge from the spin off as a much healthy company.

“They will be two completely different companies, which was really the goal of the spin-off. PayPal is going to be a great growth company growing 15-20% revenue a very exciting prospect, a very long ramp ahead investing in new technology,” said Mr. Luria.

Without PayPal on its side, eBay Inc (NASDAQ:EBAY) is expected to be a slow growth business but with the ability to return value to shareholders and with the possibility of starting a dividend offer. The slow growth may also position the company as a possible acquisition target.

Wedbush currently has a neutral rating on eBay Inc (NASDAQ:EBAY) waiting to see at what price PayPal will start trading at, once it goes public. The spin-off could prompt eBay to start charging PayPal a little bit more for being hosted on the marketplace, but Luria does not expect it to be offered a similar deal to that offered to the other merchants on the platform.

“They have done a great job with the separation agreement of making sure that PayPal has all the current advantages without paying too steep of a price to eBay Marketplace for that privilege. The reason is they knew every dollar of profit that sits at the PayPal side gets twice as a high multiple as a dollar that sits on the marketplace profit,” said Mr. Luria.

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