Back to top

Analyst Blog

eBay Inc. (EBAY - Analyst Report) plans to cut 325 jobs at its PayPal business unit in order to reduce operational costs. This layoff is an attempt by the company to optimize its cost structure and thereby improve its competitiveness.

The workforce reduction will be conducted primarily in PayPal's product and technology organizations. Management is looking to consolidate its nine product divisions into one large group and will also end relationships with approximately 120 contractors globally.

Along with other unspecified operational changes, the company will incur a pretax restructuring charge of approximately $15 million in the fourth quarter.

We believe that eBay’s existing payment platform, PayPal has done very well in the last few years. To continue its strong global growth momentum and increase its market share, PayPal needs to refine its cost structure. In the last quarter, Paypal continued to be the star performer, generating total payment volume (TPV) growth of 2.1% and 20.1%, respectively from the previous and year-ago quarters.

We believe a leaner cost structure will boost margins and earnings growth in the near future.

eBay is one of the largest online retailers in the world and appears well positioned to grow through strategic acquisitions. The restructuring announcement came a few days after eBay reported strong third-quarter 2012 earnings.

The company’s earnings of 49 cents exceeded the Zacks Consensus by 3 cents, helped by a significantly lower tax rate. Sales of $3.40 billion were flat sequentially and up 14.8% year over year, and at the high end of the company’s guidance range of $3.3–$3.4 billion.

We remain concerned about the increasing competition from major online retailers such as (AMZN - Analyst Report) as well as many other smaller players. Additionally, Google Inc has been making some plays in the online retail space that potentially increase competition for the company. While eBay’s payments business shows great promise and innovation has been very strong here, competition is not far behind.

Currently, eBay shares carry a Zacks #2 Rank, indicating a short-term Buy rating.

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UTD THERAPE… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%