I’m not sure this is what Carl Icahn had in mind when he clamored for spinning off PayPal from eBay.
When the two companies formally separated on July 20, the consensus was that PayPal had the brighter future, while eBay would be facing declining growth in its aging e-commerce business. For the next three months, it turned out, neither fared particularly well. Both PayPal and eBay fell 14 percent in that period, much worse than the Nasdaq’s 6-percent decline.
Now that both companies have reported their earnings, their numbers have diverged – although probably not in the way that many expected. eBay is trading 16 percent higher since it posted earnings on Oct. 21. PayPal reported its first ever earnings report as an independent company yesterday, and promptly slid 5 percent in after-hours trading.
The divergence may be a temporary phenomenon, since much of it had to do with expectations. The bar had been set low for eBay after third-party data showed its growth well below that of Amazon and e-commerce in general. Instead, eBay’s revenue and profit alike leaped over the bar set by analysts.
PayPal, meanwhile, reported GAAP revenue growth of 14 percent to $ 2.3 billion, a bit below what analysts were expecting. Factor out a strong dollar, and revenue grew by 19 percent. For the full year, PayPal is still forecasting revenue to grow between 15 percent and 18 percent on a dollar-neutral basis, below the growth rate of recent quarters.