Ebay Makes Smart Investments
Ebay understands the concept that it takes money to make money. The ecommerce business has spent a better part of the year focused specifically on spending a substantial amount to grow their Paypal service. Their goal is to make Paypal an entity of its own. In order for Paypal to flourish on its own it needed to grow as a business which takes money but this has truly paid off for Ebay. Paypal has now grown to a size that has the success to stand on its own.
Over the last nine months Ebay spent about nine hundred million on capital expenditures. A lot of the capital was spent to expand the business into the mobile markets and to build the branding of Paypal. Paypal's performance has been the best element added to Ebay's ecommerce business by leaps and bounds.
Ebay itself is showing growth solidly which proves the investment has created value. Revenue has risen by twelve percent throughout the first quarter of the year. In total bringing in almost thirteen billion. Operating profit has risen by four percent.
Paypal has truly carried the team with its revenue stream rising by twenty five percent. This means that Paypal is now responsible for about forty five percent of Ebay's revenue stream. Although, within the last quarter of Ebay's sales/marketing expenses has risen about two percent year after year bringing it to a twenty percent margin. Not only has the budget risen by two percent but the capital expenditures has as well. The high spending may head caution to investors but the rewards from the capital spent truly out weigh the risk.
Paypal is a solid entity that now due to the spending has a solid place in the mobile platform. Which is growing year by year. This years plan is showing Paypal to process at least one billion mobile transactions. Last quarter Paypal has attained more than four million new accounts. You can say the plan is going more than well.
As of now Ebay has attained a fair value. Ebay's stock can trade for fifteen times more than estimated. This is a significant amount on discount of where the ecommerce company should be trading. If your considering the abnormal amount of growth the company has done and is continuing to do. Its potential is noteworthy.
The future of digital is promising that the smartphone will replace our wallets. That a consumer could essentially pay from their handheld device and will no longer need credit cards or cash. With Paypal being a transaction based company with strong brand reputation the projection for its growth is astronomical. To maintain this growth ebay relies on redemption codes.
Although the worlds economic growth is looking un favorable at the moment, Ebay has a strategically placed position. Its award winning entity is about to have independence as its own company. In order for this to be possible Ebay had to not only build up Paypal but itself as well. Ebay has successfully achieved this. Ebay's revenue and profit margins are growing and sustaining along with Paypal. In conjunction with the growth of the mobile markets internationally their potential to grow is making head way around the world. These are all of the reasons that investors need not worry about Ebay's spending and focus more on what Ebay is gaining.