What Is PayPal Really Worth? eBay's Earnings Might Give A Hint

ALTERNATE TITLE: Will eBay's Earnings Show PayPal's Worth Before The Split?Analysts aren't expecting too many surprises when eBay Inc (NASDAQ: EBAY) reports after the market close today, but investors are eager to see how PayPal performed."Expect an in-line quarter," Needham analyst Kerry Rice told Benzinga. "Marketplace is still struggling, probably still recovering from cyber attacks [and] the algorithm changes by Google, things like that. PayPal looks to be fairly strong."CRT Capital Group analyst Neil Doshi expects an in-line quarter as well."I think, from eBay's perspective, it's going to be pretty much an in-line quarter," Doshi told Benzinga. "They already said that the quarter's gonna be in-line relative to expectations and guidance, so we're not expecting anything too exciting about the quarter."Doshi said he is incrementally concerned about the slowdown in eBay's core marketplace business. "That's been kind of growing well below traditional e-commerce growth rates," he added. "As we move into Q4, we wonder what eBay can do to resuscitate growth in this core marketplace business. That's one area that we do remain concerned about."

'Okay' But Not 'Great'

Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, remained cautiously optimistic about eBay's prospects."I think they'll report okay but I don't think it will be a great report," Udall told Benzinga. "I won't wanna own shares going into the report. eBay needs to do a lot of work. They need to get active in the M&A space. They need to get PayPal spun out. They need to be aggressive in other parts of their business. They might need to find things to divest."Udall referred to eBay as a former "growth darling," but said its core business just isn't growing anymore."They're going to have to think about different things to do," he added. "I'm not super-negative on it. There's a lot of value in it. I could easily see them trading up a good 15, 20 percent above where it is."Udall also thinks that eBay would be trading at $55 (versus where it is today, roughly $50) if the PayPal spin out had occurred last year.

PayPal's Growth

If nothing else, Doshi expects good things from PayPal this quarter."On the PayPal side, that business continues to grow fairly nicely," said Doshi. "I think for the most part investors are gonna treat this almost like dead money 'til we see an actual split between eBay and PayPal and ultimately how eBay funds PayPal in terms of capital structure and cost."Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.