eBay close to PayPal separation

The long slow split between eBay and PayPal continues to hang over the company. 

eBay sign on a building
Source: Bloomberg

On Wednesday 21 January eBay is due to post its fourth-quarter figures. The company’s adjusted earnings per share are expected to have increased from $0.68 up to $0.889. Sales are also called higher from last quarter’s $4.353 billion up to $4.936 billion. This combined has contributed towards the pre-tax earnings expectations rising from $801 million up to $1.349 billion.

Institutional support for the company still remains resilient with 23 of the institutional analysts rating the company a buy, 24 a hold and only three institutions calling the company a sell. There is also a premium from the current share price of $53 to the average 12-month price target of $58.39

The spin-off of PayPal from eBay has hung over the company for some time and is unlikely to disappear any time soon as a leaving date of Q3 2015 is still some time away. As a stand-alone entity PayPal has many fans and will continue to do business with eBay, but the increasing competition from Apple Pay is not going to disappear. Apple has particularly deep pockets and has felt increasing pressure from its shareholders to spend this money.

The majority of the last two years have seen eBay shares trading between a range of $50- $57.50. At the moment the shares are once again closer to the oversold level and trying to bounce off of the 200-day moving average. As things become clearer over the course of the year, and the selloff of PayPal nears, a concerted effort to break above $58 should materialise. Only a sustained fall below $50 would give cause to reassess.

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