eBay Surges Ahead of Most E-Commerce Companies
DISHA is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
eBay (NASDAQ: EBAY) was founded by Pierre Omidyar to provide online linkages to buyers and sellers, service providers and service receivers, and it continues to do so. The new generation has broken past the concept of physical market, partly because of belief and partly due to convenience and options available and the older generation is following suit. Such companies make sure to connect with their customers in a unique way. They include Amazon (NASDAQ: AMZN) and Overstock (NASDAQ: OSTK). Let us go deeper into the financials and the market scenario.
eBay’s current performance has been beyond expectation. Its revenue surged by 18% in the fourth quarter, much beyond the industry growth of around 14%. Also the net income on a non-GAAP basis surged by 17% in the last quarter, compared to that of the previous year. The volume of transactions has been more than $175 billion of commerce value in 2012, which includes both sales as well as PayPal transactions. It shows a promising upward graph.
There have been some interesting changes made by the company in the way it provides services. It had started off as an online auction site, but it is now concentrating equally on fixed price selling, as it is preferred by many consumers. This has led to a continuous growth in revenue. Additionally, CEO John Donahue, who replaced Meg Whitman two years back, has rightly promoted the mobile application. Not only has this helped in increasing the value of the stock, but it's also proving to be a major contributor to the company’s revenue. The volume for mobile offering has been 13 billion, double of last year, whereas the expected was just 10 billion. The younger generation has helped bring about this transition. The increase in the number of mobile users shall help the company maintain its present growth.
PayPal is the company’s payment segment, which allows its customers to pay and receive payments through mobile devices. This segment has shown a remarkable growth over the past few years. The payment volume has increased by 24% and sales by 24% to $1.5 billion. It has 123 million account holders who have contributed immensely to the revenue of the company.
The company provides services like charging transactions to mobile bills, offering credit at the point of sale, along with online payment. They are also considering innovations like pre-ordering. In the second quarter of 2013, eBay is entering into partnership with Discover Financial Services, which will help it to reach out to millions of customers. PayPal will now be accepted at retailers including RadioShack, J.C. Penney and Barnes & Noble.
Amazon dominates the world of internet retail. Amazon has four times the revenue of eBay and better revenue growth, but eBay’s net income is much better at $2.61 billion compared to Amazon which is only $0.04 billion. Its cash and cash equivalents for the third quarter stood at $0.645 billion. eBay has now come into the league of Amazon, and it promises a better future. Amazon’s share price has increased by 54% in 2012, to $267 and its current high valuation is not an incentive to buy it at the moment.
Overstock exists as a small player in the market. It has a quarterly revenue growth of 6.5% year-over-year. Overstock, in partnership with Rewards Network, is launching Club O Dining Rewards which will help its Club O Members earn rewards points on their dining bills. This will help Overstock connect with the millions of customers of Rewards Network which in turn will enhance its business and its growth in size. Still it will take some time before it can give competition to eBay.
In the end
The mobile business is on boom and, with a boost in physical acceptance of PayPal, eBay shall grow further. eBay shall continue to deliver in the near future since it has not reached its saturation point. It promises phenomenal growth and better margins for its investors. Hence I’m bullish towards eBay. It is a good investment to make.
dishashroff has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and eBay. The Motley Fool owns shares of Amazon.com and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!