eBay’s smaller payments unit isn’t so small anymore.
PayPal, which enables peer-to-peer transactions and digital payments, is now worth $50 billion on its first day of trading. Meanwhile, it’s former parent company, eBay, is trading at much less, or closer to $35 billion.
Today, is the first official day of trading for the two San Jose, Calif.-based companies following the decision to split apart in September. It’s clear where investors see the opportunity is going forward: It’s in digital payments, not in owning a very mature marketplace that has to compete against Amazon and others.
Still, eBay isn’t so small. It has 157 million buyers who spent $20 billion in the second quarter and, it’s more profitable than PayPal.
Although PayPal is a big business all on its own. In 2014, it processed $235 billion in payment volume across 165 million active customer accounts. Last year, PayPal reported a profit of $419 million on revenue of $8 billion.
PayPal’s shares gained 5.6 percent to $40.55 early this morning and is now trading even higher at around $41.07 a share. Shares are trading on the Nasdaq under the ticker symbol PYPL. EBay, which rose 1.8 percent to $28.40 this morning, is faring better this afternoon, trading 3.5 percent higher to $28.90. It continues to trade under the symbol EBAY on the Nasdaq, as well.
In an interview with Bloomberg, CEO Dan Schulman outlined one of its growth strategies for PayPal. After making a name for itself online, it is now targeting brick-and-mortar retailers to develop smartphone apps that let consumers place orders and make payments in advance. It’s a strategy that the company has been working on for the past few years, but has seen limited traction so far.
One big opportunity is for PayPal to secure a blockbuster deal with Amazon, now that it’s no longer affiliated with one of its largest competitors. Still, a deal with the Seattle retailer is far from a no-brainer. PayPal is obligated to offer Amazon the same rates it offers eBay, and continues to be an acquisition target, so it’s unclear who Amazon could ultimately be doing business with in the future.
Plus, eBay and PayPal are operating under a five-year agreement that will guarantee it a reliable source of revenue for PayPal after the separation.
