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eBay vs. PayPal ETFs: The Story After Spin Off

It’s been more than two years sincethe digital payment company PayPal PYPL formally cut ties with eBay Inc. EBAY. So, we can now easily evaluate how successful the spin-off decision was and throw light on their recent earnings performances (read: Spin-Off ETF: Can the Outperformance Continue?).

PayPal is now valued at $84.39 billion, more than 80% higher than what it was on its first trading day. On the other hand, its erstwhile parent company eBay’s market cap has grown to $38.38 billion from $34.63 billion in July 2015 (read: ETFs to Ride on PayPal Growth Story).

A Peek into the Latest Earnings Picture: PYPL Wins, eBAy Loses

eBay Inc. reported decent third-quarter 2017 results (after the closing bell on Oct 18) with earnings matching the Zacks Consensus Estimate and revenues beating the same by a slight margin. Pro forma earnings of 48 cents improved 6.7% year over year. Gross revenues of $2.41 billion were up 8.7% on a year-over-year basis (up 8% on an Fx-neutral basis) and came ahead of the guided range.

Shares had fallen 5.9% in after-hours trading reacting to the company’s weaker-than-expected fourth quarter as well as annual earnings outlook. Year to date, the stock has underperformed its industry, gaining only 22.7% compared with the industry’s gain of 48%.

PayPal Holdings Inc. reported better-than-expected third-quarter 2017 results on Oct 19, beating the Zacks Consensus Estimate on both counts. Pro forma earnings of 46 cents per share beat the consensus mark by 2 cents, increasing 31.4% year over year but staying flat sequentially.

Net revenues of $3.24 billion beat the Zacks Consensus Estimate by $66 million and were up 21.4% on a year-over-year basis (up 22% on an Fx-neutral basis) and 3.3% sequentially. It came ahead of the company’s own guided range of $3.14–$3.19 billion.

Buoyed by impressive results and beefed-up full-year guidance for both earnings and revenues, shares rose 3.6% in after-hours trading. PayPal shares have rallied 74.2% year to date, massively outperforming its industry’s gain of 14.6%.

Technical Stock Scores

While both stocks have a Zacks Rank #3 (Hold), Sector and Industry scores are different. PayPal’s Zacks Industry Rank is in the top 33% while its Sector Rank is in the top 25%. On the other hand, eBay’s Zacks Industry Rank is in the bottom 29% and Sector Rank is in the bottom 6%.

After such a steep rise, PayPal lost on value. It has a Value Score of F while eBay’s Value score is C. eBay has a better Momentum Score of A.

Bottom Line

Both companies are transforming. eBay is cashing in on its structured data and Artificial Intelligence (AI) strength while PayPal is focusing on inorganic growth via several partnerships. While eBay is a value play, PayPal is growth play. While a single stock-pick is always an option, a basket approach gives greater protection (read: 5 Winning ETF Strategies for Q4).

So, investors intending to ride on eBay’s value quotient may target First Trust Nasdaq Retail ETF FTXD, PowerShares Nasdaq Internet Portfolio PNQI and First Trust Dow Jones Internet Index FDN (read: Netflix at Record High: ETFs to Play).

And those who want to fly high with PayPal can focus on the likes of Guggenheim Spin-Off ETFCSD, First Trust US IPO Index Fund FPX, Global X FinTech ETF FINX, First Trust Dow Jones Internet Indexand Amplify Online Retail ETF IBUY.

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eBay Inc. (EBAY): Free Stock Analysis Report
 
PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report
 
PWRSH-ND INTRNT (PNQI): ETF Research Reports
 
FT-DJ INTRNT IX (FDN): ETF Research Reports
 
FT-NDQ RETAIL (FTXD): ETF Research Reports
 
AMPL-ONLN RETL (IBUY): ETF Research Reports
 
FT-IPOX 100 (FPX): ETF Research Reports
 
GLBL-X FINTECH (FINX): ETF Research Reports
 
GUGG-SPIN-OFF (CSD): ETF Research Reports
 
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