Shares of eBay Inc. surged to their highest level since 2006 Thursday as investors weighed the potential of the company's growing PayPal business and orders were brisk on eBay's e-commerce websites in the first quarter.
THE SPARK: Late Wednesday, eBay CEO, John Donahoe called the January-March quarter an "excellent start" to the year.
Revenue grew 29 percent to $3.28 billion. Profit grew 20 percent to $570 million, with adjusted earnings of 55 cents per share. Revenue and profit topped Wall Street estimates.
In the San Jose, Calif., company's PayPal unit, revenue jumped 32 percent to $1.31 billion. The number of active accounts increased 12 percent to 109.8 million.
THE BIG PICTURE: EBay runs PayPal and a marketplaces business, including its namesake website.
PayPal is an online payment service that records customers' credit card information, allowing them to make purchases from a websites without giving their card number to each one.
EBay has big plans to expand PayPal's reach, pushing it into brick-and-mortar stores and mobile devices.
Last month, eBay unveiled a mobile payments service for merchants, PayPal Here, that lets customers pay using credit cards, PayPal accounts or, in the U.S., personal checks using merchants' mobile phones.
EBay also recently launched a service that lets people use their PayPal accounts to pay for merchandise in Home Depot stores, a program that will expand to other large retailers.
THE ANALYSIS: Benchmark analyst Daniel Kurnos upgraded eBay to "Buy" from "Hold," saying that customers and retailers appeared ready to widely adopt new payment systems like PayPal, and the company's marketplaces business is recovering.
Kurnos said EBay's forecast is probably too conservative, and expectations for the new PayPal initiatives are too limited.
EBay expects adjusted earnings of 53 to 55 cents per share on revenue of $3.25 billion to $3.35 billion in the current quarter. That is at the lower end or below forecasts of analysts polled by FactSet.
SHARE ACTION: Shares jumped $5.07, or 14 percent, to $40.94 in afternoon trading. The stock earlier peaked at $41.84. It hasn't been that high since February 2006. Shares had gained 18 percent in 2012.