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Better Buy: PayPal (PYPL) vs. eBay Stock

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Shares of eBay (EBAY - Free Report) and PayPal (PYPL - Free Report) have underperformed the market over the last six months, with PYPL stock down marginally and eBay slumped over 12%. Yet both firms look like they could be headed in the right direction based on strong growth projections.

Overview & Recent News

PayPal officially spun off from eBay in 2015. Today, the fintech company boasts 244 million active account holders from 200 markets. Meanwhile, eBay’s active buyer base jumped by 4% last quarter to 175 million. Investors should also note that PayPal is no longer eBay’s go-to payment processor. The e-commerce firm announced the move earlier this year, saying it makes eBay more competitive with Amazon (AMZN - Free Report) .

PayPal, like rival Square (SQ - Free Report) has expanded to become much more than a payment processor. The firm’s peer-to-peer payment app Venmo is widely popular. The company has also made a series of acquisitions to help it become a more complete fintech platform. This includes its June purchase of Hyperwallet for roughly $400 million to help it expand its global payout capabilities.

PayPal also acquired fraud prevention and risk management firm Simility and its $2.2 billion purchase of small business commerce platform iZettle was completed last month. Looking ahead, PayPal wants to become more of a one-stop shop for merchants, while it also fights off the likes of Apple (AAPL - Free Report) and Google (GOOGL - Free Report) Pay.

Meanwhile, eBay has tried to rebrand itself in the age of Amazon—which it just sent a cease-and-desist letter to citing alleged recruiting practice violations—away from what some thought of as online garage sale. The firm has pushed to stand out as a place to buy on-trend items from fashion to toys.

Stock Performance & Valuation 

Moving on, investors will see that shares of PYPL have soared while EBAY has sputtered. With that said, PayPal has cooled down recently, up roughly 27% over the last 12 months. This still outpaces the S&P 500’s 15% climb. EBay, on the other hand, has plummeted 17% during this stretch.

 

The next chart clearly favors eBay. The e-commerce firm is currently trading at 16.2X forward 12-month Zacks Consensus EPS, which marks a massive discount compared to PayPal’s 42.2X. Plus, eBay is trading well below its year-long high of 25.4X and rests at its one-year low. PYPL is trading above its 12-month low of 38.6X.

 

 

Outlook & Earnings Trends

Looking ahead, PayPal’s Q3 revenues are projected to jump by 13.3% to hit $3.67 billion, based on our current Zacks Consensus Estimate. PYPL’s fiscal year revenues are expected to reach $15.44 billion, which would mark a roughly 18% climb.  

PayPal has also earned eight upward earnings estimate revisions for fiscal 2019 over the last 60 days, against just zero downward changes.

EBay’s Q3 revenues are expected to reach $2.66 billion, which would represent a 10.5% jump from the year-ago period. The e-commerce firm’s full-year revenues are projected to climb by over 13% to $10.82 billion.

At the other end of the income statement, eBay’s adjusted quarterly earnings are projected to pop by 14.6% to $0.55 per share, while its fiscal year EPS figure is projected to expand by 15%. The company has also seen some positive upward earnings estimate revisions for its current quarter, current year, and the following fiscal year over the last seven days.

Bottom Line

PayPal and eBay are both currently Zacks Rank #2 (Buy) stocks based on their recent upward earnings revision trends. Both companies also currently look poised to grow both their top and bottom lines at similar rates. However, PayPal seems like it might be a better long-term buy as the fintech industry looks poised to become much more important, while eBay’s platform is more easily replicated.

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