eBay's (EBAY -0.54%) stock has been on a tear over the last year, up 30% -- or about double the stock market's climb.
Investors had good reason to bid up the company's shares. Over the past three months, eBay boosted its revenue by 14%. The company saw its earnings rise even faster, by almost 16%. Still, eBay's biggest growth drivers seem as strong as ever. And they look set to power the business -- and the stock -- to new highs.
Everybody's pal
Take PayPal, for example. That business added 5 million active accounts in the quarter, bringing the total to 128 million users. Sales hit $1.5 billion, up 18% from the year-ago quarter. eBay thinks that's just the start, though. The company expects the PayPal business to reach $10 billion in revenue by 2015.
But for eBay to hit that ambitious goal, it will need to break PayPal out of its online home and into the much bigger world of offline retailing. That's the reason it has pushed so hard to make the payment service a standard option at more offline retailing spots. After about a year at that task, PayPal is now available at about 20,000 retail locations. And that progress will be kicked into high gear this quarter, when PayPal's partnership with Discover brings even more merchants into the fold.
Heading to the market
eBay runs a thriving marketplace, too. Revenue from that business rose to $2.0 billion in the last quarter, as eBay connected buyers and sellers in $18 billion worth of transactions. That $2.0 billion in sales is expected to surge to $11 billion by 2015.
But eBay faces stiff competition from Amazon.com (AMZN 1.34%) here. The gorilla of online retail sold $10 billion of merchandise last quarter, with about 40% of those sales coming from third-party sellers. eBay needs to convince some of them to jump ship to its own marketplace. That's why its making a big push for those vendors. eBay has revamped its listing fees, and is stressing the fact that, unlike Amazon, it doesn't compete with the sellers it services by hawking its own products alongside theirs.
Bottom line
Even with the stock's big run-up lately, I think there is room for additional gains. eBay is improving its marketplace business while expanding its online payments success into the offline world. The company has proven itself to be a leader in enabling e-commerce, and now believes that it has a shot at a piece of the $10 trillion commerce market. A P/E ratio of about 25 times earnings sounds expensive, but it isn't too much to pay for a business with that kind of potential.
