eBay (
EBAY
), which competes with other e-commerce sites like Amazon (
AMZN
), Wal-Mart (
WMT
), Overstock (
OSTK
), and Blue Nile (
NILE
), recently held an Investor Day in which the
company discussed future growth areas and presented its
business outlook through 2013. One notable highlight of the
presentation was the company's expectation of rapid growth from its
PayPal, Bill Me Later and StubHub businesses.
Here we examine eBay's growth areas in detail and the potential
upside that it could add to our
$32.81
stock price estimate, which stands slightly below market
price.
PayPal Driving Growth for eBay
PayPal already serves an estimated 59 out of the top 100
merchants in the U.S., and the company expects that PayPal
will be able to gain market share in the online payment market from
around 14% in 2008 to 22% in 2013. The company also expects that
PayPal's penetration on eBay could increase from 58% in 2008 to
around 80% by 2013.
This implies that PayPal can gain traction going forward,
although it faces competitive threats from China's AliPay. We have
previously discussed AliPay and have noted that Yahoo
(YHOO) benefits indirectly from Chinese internet market growth
(See
Yahoo's Alibaba Stake Offers Upside on Chinese
Internet Growth
).
The growth of the eCommerce market has traditionally lifted
PayPal, and PayPal has been able to increase the number of user
accounts from 30 million in 2006 to around 95 million by 2010. We
expect that this growth will continue and that the number of
accounts could reach 245 million by the end of our forecast
period.
See our full analysis and $32.81 price estimate
for eBay
However, the growth could be even greater should eBay
successfully increase its global market share, particularly in the
Asian market (See PayPal Growth Could Spell 10% Upside to eBay's
Stock).
Bill Me Later and StubHub are Other Growth Areas for
eBay
Bill Me Later (BML) has shown an average Total Payment Volume
(TPV) growth of 20% over the last two years. According to the
company's internal analysis, BML has helped eBay increase the
average spend per customer and user engagement by around 100%. A
few weeks back, we covered a story on how BML is driving PayPal's
margins (See
Bill Me Later Driving eBay's Paypal Profit
Margins
).
StubHub, which is an interface for buying movie tickets, has
also seen average revenue growth of 23% over the last two
years.