Paypal is going to reap the benefits of being ditched by eBay

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• eBay announced on January 31 that it would replace Paypal with Adyen BV as its payments processor on its site.
• The contract change gives Paypal an opportunity to pursue other marketplace acceptance deals, which can increase market penetration and drive earnings.
• Watch Paypal trade in real-time here.

Paypal and eBay's recent contract changes left Paypal investors nervous, but the shifting relationship between the two companies can also present an opportunity.

After years of using Paypal as its payments processor on its site, eBay announced on January 31 that it will replace its long-time partner with Adyen BV, a payments company from the Netherlands. Paypal shares fell more than 8% following the news. However, that change now gives Paypal more options and freedom in pursuing other online marketplace acceptance deals.

"As the new EBAY relationship does not include a 'most-favored-nation' pricing match, the company should be better positioned to compete for new marketplace acceptance contracts," Jefferies analyst Ramsey El-Assal wrote in a note to clients. "We believe PYPL's value proposition is compelling to marketplaces, given high conversion rates, and loyalty to the brand."

El-Assal estimated Paypal is accepted at merchants representing 12% of the $1.35 trillion purchase volume generated across 75 top global online marketplaces, meaning "there is still plenty of runway ahead." He sees a potential of $1.8 trillion purchase volume from marketplaces where Paypal is not accepted and expects every additional 1% in penetration will increase annualized 2020 earnings per share by around $0.06.

"Any new marketplaces adds would be incremental to our already existing estimates," he said, reiterating a "buy" rating.

Paypal is up more than 8% this year.

Markets Insider