Foresight is a vital necessity and actually draws the all-important line separating average Joe from the canny investor.
Before delving into future possibilities, it would be in order to concisely and objectively look at the prevailing circumstances.
Business’ core is doing remarkably well
I have noted that eBay’s main lines of business are doing notably well. This is especially so if you consider its frictionless transformation as it tries to capture the fast growing mobile retailing market. This transformation has already gleaned unprecedented results as recent earnings reports reveal that eBay recorded a GAAP net income of $692 million. Revenue equally bulged, hitting figures of $3.4 billion, thereby recording a 23 percent leap on a year-over-year basis.
Numbers don’t lie. What is the chemistry behind this standout performance? Good choices. Purchasing PayPal was perhaps the best move that eBay ever made as far as acquisitions are concerned.
eBay is profit oriented. This is candidly demonstrated by its fashion of handling acquisitions. It steers clear of mediocrity and goes with what works. Skype wasn’t sending down any ripples and was cast out of the window 4 years after acquisition. PayPal on the other hand is doing quite well and as such has been accorded profound priority. PayPal not only reaches out to a larger market but has also in recent days received a lot of bullish remarks.
A section of analysts even believe that PayPal will soon even the grounds and candidly compete against big names like American Express (APX) and Visa (V). Although this is speculation, it bears a lot of logic, and in my line of thought could very well come to see the light of day. After all, PayPal did post incredible income figures. A 26 percent increase is no simple feat – especially so if the figures in consideration are billions. The online payments guru brought in $1.4 billion last quarter.
I believe that eBay is better placed with PayPal. The alliance avails better prospects and increases possibility of making profit (which we have already seen).
Incertitude plants seed at competitors’ back yards
There is a seemingly big cloud of uncertainty shadowing eBay’s core competitors. For starters, Overstock (OSTK) is shrinking. Its deplorable financial position spells little or no hope and in my line of thought places it in a familiar nonstarter category. As such, Overstock’s rickety performance extends a leeway for eBay narrowing down the race to Amazon (AMZN), Google (GOOG) and eBay.
While eBay may not have the same financial muscle as Google and Amazon, it is better placed. Google and Amazon are caught up in heated rivalry as both of them try to cast their nets on the overcrowded tablet market. Google on the other hand has diverging interests as it is receiving pressure from multiple ends. If it is not a recent $22.5 million fine over privacy allegations, it is the unending patent struggles with Apple. As such, its progress may be slowed.
What does all this mean for eBay?
The prevailing conditions extend a lot of hope for eBay. The future is bright and investors should save up for a rainy day.
For starters, eBay’s unique business model gives it a cushioning against some of the risks faced by competitors like Amazon and Google. Unlike Google and Amazon, it does not have products of its own and merely sells what is in demand. This means that as far as people are buying, eBay will always continue growing.
Leaning towards mobile retailing also says a lot about eBay’s future. The smartphone craze will play an instrumental role in steering its success and I am confident the future looks brighter with mobile involved.
With the noted income figures and the predominant set of circumstances, I am surefooted that investors will receive incredible returns in the long haul. eBay is perfectly positioned for growth and will gain a lot of ground in the remaining part of the financial year. It is a strong buy.