(Reuters) - Shares of e-commerce platform eBay Inc surged nearly 11 percent on Thursday after it reported strong results and launched a new partnership to take more control of payments on its sites from long-term partner PayPal Holdings Inc.
Little-known Dutch firm Adyen will become eBay’s primary payments processor under the scheme, which seeks to see more transactions conducted directly on eBay’s sites.
Analysts said that might bring in more revenue for eBay while lowering costs, adding to optimism from a strong holiday quarter for the company.
“There is no denying eBay has got its groove back and a series of shrewd moves by management has the company reinvigorated and well positioned for future growth,” Tom Forte, analyst at brokerage D.A. Davidson & Co wrote in a note.
Some analysts said they were surprised by eBay’s estimate of the benefits from taking payments intermediary service in-house. The company said it would add $500 million to operating profit after the PayPal deal expires in mid-2020.
Transactions through eBay account for roughly 13 percent of total payments processed by PayPal, whose shares sank more than 7 percent in response on Thursday.
Other analysts, however, said PayPal, which has been eBay’s preferred provider for the past 15 years and will remain a payment page option on the platform for the foreseeable future, had the scale to ride out the blow.
“Over time, given the recent agreements with Visa and MasterCard, PayPal will be able to scale and expand margins,” Wedbush Securities analyst said.
Reporting by Muvija M and Laharee Chatterjee in Bengaluru