eBay still boosted by soon-to-be-spun-off-PayPal in Q1, so what is the future for eBay itself?

The big question around online retail and auction giant eBay’s Q1 results is – what will it do after its PayPal unit is spun off? PayPal has been boosting eBay overall for some time and certainly did so this quarter. But with the two soon to be separate companies, how will eBay itself fare? The results announcement gave a few clues but the future strength of eBay still comes with a big question mark.

So what were the numbers? eBay as a whole reported better-than-expected Q1 profit as revenues continue to surge from its payments business, including PayPal. Its shares rose 5% in extended trade.

eBay reported net income of $626m/51 cents per share for Q1 to end-March compared with a loss of $2.33bn/$1.82 per share, a year earlier, hit by a major one-time tax charge.

Profit, excluding items, rose 77 cents, beating analysts’ expectations of 70 cents per share. Net revenue rose 4.4% to $4.45bn, also topping analysts’ $4.42bn view.

Revenue from the payments business rose 14% to $2.11bn, accounting for nearly half of total revenue.

So what of the eBay retail business? eBay has relied heavily on PayPal to offset sluggishness in the marketplace business that is what most consumers most associate with eBay. Marketplace this time reported a 4% dip in quarterly revenue to $2.07bn, hurt by a stronger dollar.

But the company said it sees signs of stabilisation in active buyers and gross merchandise volume, or the total amount of goods sold, excluding the impact of that stronger dollar.

eBay said it will focus on growing its 25m sellers and 157m active buyers by focusing on small- and medium-size merchants that make up 70 % of the global retail market.

Devin Wenig, the incoming CEO of the marketplace business, said the unit is still struggling to overcome changes to Google’s algorithm that have suppressed its products from search results.

“We have more work to do to ensure we deliver consistent sustainable performance and accelerate growth,” he said on the company conference call.

Meanwhile, PayPal said in April it would continue charging eBay merchants less than it does other merchants and the two companies would stay interdependent for the next five years.

The business has benefited from a surge in payments using mobile devices as customers increasingly use their smartphones and tablets for online shopping.

PayPal’s mobile payment transactions, which account for nearly a third of its total transactions, rose more than 40%.

Average transactions per PayPal account rose to 23 in the quarter from 21, said PayPal president Daniel Schulman, who is set to be appointed the chief executive of the spun-off company.

eBay forecast revenue of $4.40bn-$4.50bn for Q2 and $18.35bn-$18.85bn for the full year, both falling short of analysts’ $4.57bn and $18.96bn, which eBay blamed on a strong dollar.

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