Strong Performance from eBay as July Sales Increase
Muhammad 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) which is the second largest online retailing platform after Amazon (NASDAQ: AMZN) has had good news to report to investors. eBay showed a strong performance in the market as July sales were reported to have increased substantially. The shares rose by 3% as the demand for commodities such as cars and other fixed price goods increased. This stock has been showing a particularly impressive performance this year as it has been able to gain by 49%. Analysts have pointed out that some of the factors instrumental in boosting sales include eBay’s partnerships with more merchant services, along with improvement to the core website. In a bid to make customers’ retail purchasing easier, eBay has also partnered with Home Depot to allow customers to pay for goods via PayPal. This has been highly appreciated since PayPal was traditionally an online based service and its incorporation to physical retailing centers makes shopping much easier. EBay has also been pushing for more people to use smartphones and PCs when making purchases, a move that should more than double sales revenues this year alone.
How the competition is fairing
EBay, which was once a scrappy auction site, has now grown into one of the largest online retailing sites putting up formidable competition to the likes of Amazon. It is, however, apparent that Amazon has made big plans to take on its competitors if the rumors in circulation are anything to go by. Claims that an Amazon smartphone or tablet is scheduled for a release next month is certainly bound to put some pressure on its rivals. More and more brand retailers are entering into binding agreements with eBay so as to increase their competitiveness both on and offline. Overstock.com (NASDAQ: OSTK) which is relatively new to this industry is one of the competitors that promises to give eBay a run for its money. With an operating cash flow of about $19 million and revenue of $1 billion for the trailing twelve months, things seem to be going surprisingly well as it posted a profit during it last quarter. Despite the fact that the profits were modest at best, analysts have backed this stock resulting in a 32% increase in share price over the previous month. Groupon (NASDAQ: GRPN) on the other hand has had investors in a panic as its performance has been somewhat disappointing of late.
While eBay continues to foster relations with more brand names and merchants, Groupon – as analysts state, has been deviating from its original business plan. Whereas it was established to assist sellers in their operations, it is now taking a shot at direct sales, hence exposing it to more risks. Heavy selling of the stock, which has seen it drop by about 30%, has left investors extremely worried about its chances of getting back on its feet. Groupon’s future seems to be getting grimmer as recent reports indicate that it’s top sales executive Lee Brown has walked out of the company. Although Groupon managed to post $46.5 million profit in its second quarter, analysts are still not confident about its potential as a long term investment.
A new dawn for eBay
Since the introduction of Google Wallet by the tech firm Google (NASDAQ: GOOG), eBay has had to enhance support to its PayPal platform. Google Wallet, which is available only on Android phones has been the latest development of mobile solutions that allows one to access money through their smartphones. In a move that eBay said would be instrumental in building trust in the marketplace, the ban of some sales categories will be instituted. The sale of spells, hexes, prayers and even blessing services will be banned effectively from September. Personally I am inclined to side with this move since scammers have taken the opportunity to prey on unsuspecting victims. Quite frankly the sale of potions and other ‘magical’ items has no place in the world of business since business works with pure facts and proven models. Thus congratulations should be in order for eBay. Those who have profited from the sale of work from the home business and information category have also not been spared since this category is also being scrapped.
More stringent rules have also been rolled out to ensure that business between seller and buyer is run smoothly as penalties for violation of these rules have been introduced. One such example is that sellers who end an auction before the schedule time will be subject to a fee. Looking at the chart below, my view that eBay is a strong investment is supported.
EBay has been able to show consistent growth for two years now, making it a fit venture for anyone looking for a solid investment. I believe that once the new changes take effect, eBay will become increasingly competitive and bring more returns to investors.
muhammadbazil owns shares of Google. The Motley Fool owns shares of Amazon.com and Google. Motley Fool newsletter services recommend Amazon.com, eBay, and Google. 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.If you have questions about this post or the Fool’s blog network, click here for information.