Following a slightly disappointing earnings report on Wednesday, eBay’s
shares were down more than 4 percent in pre-market trading on Thursday. The company met Wall Street’s expectations in terms of revenue and earnings per share, but missed in terms of active user growth and the earnings forecast for the fourth quarter. Facing stiff competition from Amazon, eBay is viewed skeptically by many investors after the split from its former growth motor PayPal in 2015. The company, now focused on its core marketplace business, is still doing okay, but it seems like a mature business with limited room for future growth.
Prior to the company’s announcement
of the split in September 2014, many people shared the impression that eBay was actually holding PayPal back, which ultimately resulted in the amicable divorce. At the time, PayPal was already growing faster than eBay’s core marketplace business and many people thought that it could do even better if its potential partners (i.e. third-party online retailers) would no longer have the feeling of feeding an enemy (eBay) when working with PayPal.
That turned out to be right. After the split, PayPal’s
business continued to flourish while eBay struggled to keep pace with its former subsidiary. As of today, PayPal’s market capitalization ($80.25b) has grown to nearly twice that of eBay ($39.21b) and we can expect that trend to continue going forward.