Boston, MA 10/06/2014 (wallstreetpr) – eBay Inc (NASDAQ:EBAY), which was pretty confident about the strong combination of PayPal and the company till recently has changed its tone abruptly. Time and again, eBay’s CEO, John Donahoe, had rebuffed the suggestions of spinning off PayPal from eBay. Now the company has suddenly accepted the same vision, which will end the role of Donahoe in either of the companies following the division. The new decision to part ways has raised both excitement and fears among investors.
The first question that haunts the minds of an investor is WHY? This is well-explained from the recent emergence of ApplePay by Apple Inc. (NASDAQ:AAPL), which has included MasterCard Inc (NYSE:MA), Visa Inc (NYSE:V) and American Express Company (NYSE:AXP) in its platform and has forged in tie-ups with retailers like Macy’s, Inc. (NYSE:M), Whole Foods Market, Inc. (NASDAQ:WFM) and Target Corporation (NYSE:TGT). Though the performance of ApplePay is still to be found out, but it can change the competitive landscape for eBay Inc (NASDAQ:EBAY) in terms of networking and business model. It is not the case that PayPal didn’t put effort to collaborate with Apple Inc. (NASDAQ:AAPL) as it has been in talks with the iPhone maker early this year. But, PayPal’s association with Apple’s enemy Samsung spoiled the talks and in fact evaporated the chances of any alliance.
Value Of Business
Though investors are happy with PayPal division, analysts from JP Morgan have downgraded eBay Inc (NASDAQ:EBAY) on account of its loss. According to some Wall Street analysts, PayPal worth will be 15 times its earnings before interest and other charges, above the valuation of peers like Visa and Mastercard. But Analyst, Doug Anmuth, from JP Morgan, has assigned a ‘neutral’ rating to eBay Inc (NASDAQ:EBAY). He thinks that the real worth of the company is $61, 11% above its recent closing price. On the other hand, Visa and Mastercard’s 2.3 billion and 1.3 billion number of cards respectively simply dwarfs the 152 million accounts held by PayPal, which is a dampener on the idea of PayPal’s underlying value. Therefore, the impact of this decision will only be proved at a future point of time when events will take their course.