Shares of e-commerce platform eBay Inc surged almost 11 percent on Thursday after it reported strong results and launched a new partnership to take more control of payments on its sites from long-term partner PayPal Holdings Inc. Adyen will also provide reduced costs for sellers and a simpler pricing structure.
The shift will start gradually in North America later this year and eBay expects most marketplace customers around the world to be using the new system in 2021.
"Moving away from PayPal (PYPL.O), lowering the costs of selling products on the marketplace makes eBay a more significant competitor because it lowers the relative cost versus others including Amazon (AMZN.O)", said D.A. Davidson & Co's analyst Tom Forte. (EBAY ) will shift its payments business from long-time partner PayPal Holdings Inc. It says it handles more than 200 different payment methods and over 150 currencies.
Analysts had largely expected the agreement to continue, and there will be concerns about total payment volume going forward despite EBay becoming a smaller portion of that number over the past few quarters.
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EBay accounted for 13% of the payments PayPal handled in the fourth quarter, down from 16% in the same period a year earlier, PayPal said. When eBay spun off PayPal in 2015 - something investors and analysts had urged it to do - the payments company's market value was close to $50 billion. "Although the share of revenue from EBay has diminished over the years, the share of profit is far more substantial due to the terms of the spinoff". EBay purchased PayPal in 2002 and phased out its own competing payments service at the time.
PayPal's business with eBay is big and still growing: it was up 10% in the fourth quarter of 2017.
For the quarter ending March, eBay forecast revenue between $2.57 billion (1.81 billion pounds) and $2.61 billion and adjusted earnings of 52 cents to 54 cents per share.
EBay Inc (EBAY.O) posted higher revenue for the key holiday quarter on Wednesday as changes to its websites and a focus on marketing drew more shoppers to its marketplaces. Double-digit growth was a big milestone for CEO Devin Wenig, who has been working on a turnaround.