eBay’s Stock to Gain From Facebook Using Paypal

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eBay ( EBAY ) recently established initiatives to continue the growth of its PayPal business, including the launch of the new payment solution for digital goods. eBay's PayPal service competes with Google ( GOOG ) Checkout and credit card companies like Visa ( V ) and MasterCard ( MA ).

The solution will be incorporated into Facebook allowing users to seamlessly purchase games and applications on its site. We believe such initiatives could add upside to eBay's stock, which derives roughly 19% of its intrinsic value from PayPal by our estimates.

We currently maintain a $31.33 price estimate for eBay stock , implying roughly 5% upside to the current market price.


PayPal's New Payment Solution and Integration with Facebook

PayPal generated total payment volume (TPV) from its digital goods business of $2 billion in 2009, and is expected to reach $835 million in 2010 on Facebook alone. Facebook has more than 500 million registered users and has generated substantial interest for games like Zynga's Farmville and Mafia, in which users can purchase digital goods. Facebook's adoptation of the new PayPal payment solution could be a boon to eBay and spark considerable growth in the number of PayPal accounts.

We estimate that the number of PayPal accounts has increased from around 31 million in 2006 to 77 million in 2009, at an impressive CAGR of 35%. We expect continued growth in PayPal accounts going forward, reaching 150 million by 2013.

There could be an additional 4% upside to the $31.33 Trefis price estimate for eBay stock should eBay's initiatives grow total PayPal accounts to 175 million by 2013, above our current estimate of 150 million current accounts.

You can see the complete $31.33 Trefis Price estimate for eBay stock here .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: EBAY , GOOG , MA , V

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