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EBay will switch to Adyen payments platform from PayPal
02 February 2018, 09:18 | Ruby West
Telos Capital Management Inc. Sells 2203 Shares of Paypal Holdings Inc (PYPL)
Since the beginning of the calendar year, the stock is 15.89%.
"Over time, given the recent agreements with Visa and MasterCard, PayPal will be able to scale and expand margins", Wedbush Securities analysts said in a client note.
Ebay has stated that there will be a number of benefits for buyers and sellers with the new payment system, one of the biggest ones being lowered costs of payments processing for sellers as well as a simplified pricing structure and "more predictable access" to sellers funds. Customers choosing to pay with PayPal, the part of the eBay business that remains, is far more profitable than the backend processing volume that is moving to Adyen, he argued.
The company processed $131 billion in total payments volume for the fourth quarter, showcasing 32% growth. Adyen will become the primary payments processor for eBay sites across the world, but the company's business is exclusively focused on providing back-end payments services, like credit card processing, to businesses.
PayPal Holdings (PYPL) announced earnings of $0.55 per share yesterday, which exceeded Wall Street expectations of $0.52 per share. As a matter of fact, eBay purchased the online payment company for $1.5 billion United States dollars in 2002. The two operations were joined at the hip, and eBay used PayPal as its nontraditional way to spend money at the online auction site.
In Thursday morning trading, EBAY was trading 13% higher on the news, while PYPL was down 9%.
PayPal will remain on eBay's platform until at least July 2023.
This is in spite of PayPal's CEO Dan Schulman telling analysts that their changing relationship with eBay was "manageable". Also, PayPal will cease to process card payments for eBay after 2020.
Giant eBay brought earnings of $2.61 in revenue in its latest quarter.
The announcement surprised some investors, who expected the companies to announce an extension to their operating agreement.
In terms of earnings per share, 37 analysts have a 0.54 EPS mean target for the quarter ending Mar-18, for the quarter ending Jun-18, 37 analysts have a 0.54 EPS mean target and for the quarter ending Jun-18 there are 44 estimates of 2.26 EPS.
So this breakup has got to sting a little, even if PayPal has long since moved on to sowing its wild oats across the rest of the e-commerce industry. A strong and prospering eBay is a good thing, but only time will tell. Earnings excluding some costs were 55 cents a share, compared with the average forecast for 52 cents.
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