eBay Or PayPal: Which One Should You Invest In Post The Spin-Off?

eBay Inc EBAY reported better than expected first-quarter earnings post market closing on Wednesday causing its shares to open strong today. Now, that the eBay-PayPal spin-off is finally going to be reality, the question investors are asking is -which one to bet on?

Gil Luria, managing director Research of Wedbush Securities, was on CNBC recently to answer that question.

Two Different Roads

“There will be two completely different companies, which was really the goal of the spin-off,” Luria said. “PayPal is going to be a great growth company growing 15-20 percent revenue, very exciting prospect, very long ramp ahead, investing in new technology and the eBay marketplace business is going to be a good share to own for value investors.”

“It’s going to be returning cash to shareholders. It’s going to likely start a dividend and so even though it is going to grow much slower, there is a shareholder base that would like that. Up until now eBay has been an in between company.”

He continued, “They weren’t going quite fast enough and not returning enough cash to shareholders by splitting these two shares that are very appropriate for the growth investors and value investors and that’s a big reason why they are doing this spin.”

The Better One

Luria was asked if he would be investing in both the shares post the eBay-PayPal spin-off or would he be looking at one over or the other. He replied, “Right now we have a neutral rating and a lot of it has to do with that question of what the shares start off at once there is a spin, if PayPal comes out at $35 or below, it’s probably the more interesting half. If Marketplace comes out at $25 or below, that’s probably the more interesting half.”