Please ensure Javascript is enabled for purposes of website accessibility

eBay Stock Gets Charged Up: What Investors Need to Know

By Tamara Walsh - Apr 12, 2013 at 4:08PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Why eBay stock could surge in the week ahead.

Investors with eBay (EBAY 5.06%) stock in their portfolios will be happy to know that PayPal's long-awaited deal with Discover Financial Services (DFS 1.28%) officially launches next week. As soon as next Friday, April 19, PayPal's digital payments platform will officially be available to 2 million U.S. retailers that currently accept Discover credit cards.

When PayPal and Discover first announced this partnership last year, PayPal was only available in about 3,000 U.S. stores, most of which were Home Depot (HD 1.87%) locations. This means that as of next week, PayPal's footprint will more than double in size -- seemingly overnight.

Growth in eBay's PayPal business should push eBay stock higher, particularly because PayPal makes up about 40% of eBay's revenue. Moreover, by leveraging Discover's broad network of merchants, eBay could see its mobile transaction volume hit record highs this year.

Mobile money wars
eBay began testing its PayPal point-of-sale service more than a year ago at thousands of Home Depot stores around the country. Together with Home Depot, PayPal is finding new ways to entice in-store customers to pay with its point-of-sale service. "Home Depot and PayPal have run several promotions in recent months, offering $5, $10 or $25 rewards to users who spend a certain amount in-store with PayPal," Reuters reports.

One of the major upsides for retailers and stores such as Home Depot is the fact that PayPal's system operates at a lower transaction cost compared to traditional electronic terminals. Still, eBay isn't the only company vying for a piece of the roughly $10 trillion physical payment market. eBay's PayPal faces competition in the space from big names including Starbucks' Square service, and Google Wallet.

However, PayPal's reputation as the trusted leader in online payments is one advantage it has over Google in the space. Additionally, PayPal hopes to further set itself apart from the competition by offering merchants valuable customer data, according to Reuters.

Ultimately, if PayPal's point-of-sale initiatives catch on, it would be a boon to eBay stock. Shares of eBay are up more than 12% year to date, and the stock is trading at around $57 per share. However, thanks to its PayPal business, I think eBay stock can continue to climb higher from here.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

eBay Inc. Stock Quote
eBay Inc.
EBAY
$48.82 (5.06%) $2.35
Discover Financial Services Stock Quote
Discover Financial Services
DFS
$112.20 (1.28%) $1.42
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
HD
$308.46 (1.87%) $5.65

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
356%
 
S&P 500 Returns
124%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.