Gauging Future Growth Areas for eBay

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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.



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: AMZN , EBAY , NILE , OSTK , WMT

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