Shares of eBay (NAS: EBAY) hit a 52-week high on Tuesday. Let's look at how it got here and whether clear skies are ahead.
How it got here
After hitting a 52-week high last month, eBay pushed to a fresh high on Tuesday as the company continued to see momentum sparked by recent bullish comments from an analyst.
Shares jumped 4.5% Monday to a six-year high as boutique investment bank and research firm Keefe, Bruyette & Woods, or KBW, initiated coverage on eBay with an "outperform" rating and $50 price target. KBW analyst Sanjay Sakhrani was particularly bullish on eBay's PayPal payments processing business, which has continued to march higher over the years as a percentage of total revenue and is the company's most promising growth catalyst.
Sakhrani said: "There is a consensus brewing that the next decade or so will see the proliferation of electronic commerce, largely aided by the increased prominence of the smartphone globally. We believe eBay is uniquely positioned to benefit from and capitalize on the convergence of commerce, payments and marketing."
eBay CEO John Donahoe recently said PayPal could soon become its largest division, overshadowing its namesake auction business. If that happens, eBay might want to consider a name change, just as Coinstar should, since Redbox is the majority of Coinstar's sales.
KBW sees a clear threat for traditional payment processing powerhouses Visa (NYS: V) and MasterCard (NYS: MA) , even as PayPal processes payments through their networks. PayPal also processes transactions using electronic debits that result in lower costs for merchants.
How it stacks up
Let's see how eBay stacks up with its e-commerce and payment processing peers.
Let's also compare some fundamental metrics for a deeper read.
|Amazon.com (NAS: AMZN)||182.9||33.8%||0.9%||7.7%|
|MercadoLibre (NAS: MELI)||37.2||36.3%||25.7%||39.1%|
Source: Reuters. TTM = trailing 12 months. MRQ = most recent quarter.
Amazon is eBay's closest marketplace competitor, while it doesn't compete with MercadoLibre in Latin America. eBay's frenemy-ship with Visa and MasterCard in the more profitable payments processing business is likely to intensify in the coming years.
Payments really are the belle of the ball. The segment grew 31.8% last quarter, far outpacing the marketplace's 11.3%. Watch out, Visa and MasterCard. PayPal is eyeing your pie.
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At the time this article was published Fool contributor Evan Niu owns shares of Amazon.com, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of MercadoLibre, Amazon.com, and MasterCard. Motley Fool newsletter services have recommended buying shares of Amazon.com, Visa, MercadoLibre, and eBay. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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