PayPal has emerged as a leading electronic payment method, expanding well beyond eBay’s platform. The payment method is already accepted by more than 60 of the top 100 online retailers in the U.S., and it processes more than 25% of online retail transactions in the country. The opportunities for international expansion are nothing short of amazing; the technology is becoming very popular in emerging markets, where a smartphone and a PayPal account are sometimes more accessible than a bank account or other alternatives.
eBay reported during its last earnings report that PayPal has now nearly 123 million active accounts; more than 5 million of which were added in the fourth quarter, PayPal’s biggest gain in 8 years. Mobile payment volume reached nearly $14 billion in 2012, up more than 250% over the prior year, as consumers are increasingly using smart phones and tablets to pay online.
And opportunities for offline expansion are looking increasingly strong too, the company is working on a partnership with Discover Financial Services, which is estimated to launch in the second quarter of this year. The deal will provide eBay access to a network of more than 7 million merchants, while Discover will pick up more transaction volume by processing the payments for PayPal.
At a Jamba Juice location in Emeryville, California, PayPal is testing an order-ahead mobile feature. Consumers can order their smoothie in advance, choose their pickup time and then skip the line at Jamba Juice by paying via PayPal. PayPal’s in-store point-of-sale solution is now available at 23 major retailers all over the US, and there is no end at sight for its growth opportunities.
Other Opportunities
eBay owns 18% of Mercado Libre, the leading ecommerce platform in Latin America which has a similar business model to that of ebay. Mercado Libre has also been fostering Mercado Pago, its own payment system which is growing beyond the ecommerce platform and playing a similar role to the one PayPal plays for eBay. Ecommerce is a high growth business, and Latin America is a high growth region, so Mercado Libre has delivered sales growth above 40 % annually over the last five years on average.
In 2011 eBay acquired GSI Commerce; a company specialized in creating, developing and running online shopping sites for brick and mortar brands and retailers. This acquisition gave eBay access to more than 180 retailers including brands like Ralph Lauren and Victoria’s Secret while at the same time broadening its portfolio of services and generating cost savings via synergies. Performance is being quite strong in this segment too: GSI delivered a 19% increase in same-store sales for its clients over the last quarter.
Bottom Line
eBay is firing on all cylinders; growth opportunities are aplenty and coming from multiple sources. The stock doesn´t look to expensive at a forward P/E ratio of 17.2, so placing a bid – pun intended – for this innovative growth stock looks like good idea, even after the recent run up.
The article This Growth Stock Is Firing on All Cylinders originally appeared on Fool.com and is written by Andrés Cardenal.
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