EBay Drops as PayPal Cash Flow Forecast Cut on Spinoff Costs

Updated on

EBay Inc. fell the most in six months after it cut its free cash flow forecast for PayPal, the payments division that it plans to spin off later this year.

EBay, based in San Jose, California, declined 3.8 percent to $60.85 at the close in New York, the biggest one-day slide since October.

PayPal’s free cash flow will be $1.6 to $1.8 billion in 2015 from a year earlier -- $100 million less than the company forecast in April because of “greater clarity on separation costs,” according to an EBay presentation to investors Monday. Free cash flow at EBay will be as much as $2.3 billion this year, according to the presentation.

“The hope for investors is that PayPal would be able to accelerate revenue and margin growth post-split, given merchants may be more willing to work with a PayPal outside EBay,” Bloomberg Intelligence analyst Praveen Menon said. “The bigger concern is flat expectations for revenue and margin for 2016 and beyond.”

The split, expected to close this year, comes after activist investor Carl Icahn said PayPal was being held back by its parent company’s slower-growing Web marketplace business.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE