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EBay Is Growing Big

July 01, 2014 | About:
Suravi Thacker

Suravi Thacker

1 followers

In the era of continuous innovation there are constant improvements in technology. The emergence of smartphones has thrown up a large number of ways for companies to grow. One such industry is the M-commerce industry, which has opened up a lot of opportunities for electronic payment providers. People find it extremely easy to shop and make payments through their phones, and hence the need for these providers.

eBay (EBAY) is one such player that has been truly enjoying the benefits of this new development. Its mobile payment solution, called PayPal, has been very successful. It has been posting great results, driving eBay’s performance north. In fact, its first quarter results also highlighted the growing importance of PayPal and other efforts of eBay. Let us look into the details.

The Key Drivers…

Amazing initiatives taken by the company and customers’ growing mobile engagement drove revenue to $4.3 billion, registering a growth of 14% over last year. The top line was driven by growth in all the geographic regions and an increase in commerce volume growth of 24%. Occasions such as Black Friday, Thanksgiving, and the peak winter season played an important role during the quarter.

However, this is not the first time that eBay has performed amazingly well and surpassed analysts’ estimates. The payment provider’s revenue has been increasing continuously over the last five years, resulting in an increase of 103.1%. On the other hand, peer NCR Corporation (NCR) registered a growth of 35.1% only, during the same period.

PayPal has played a very important part in eBay’s performance. Growing acceptance of mobile payment systems has benefited not only eBay, but also its industry peers such as VeriFone Systems (PAY) and NCR Corporation. However, eBay has shown great growth in terms of return to investors, in comparison to its peers. Five year stock price performance of NCR and eBay is 187.0% and 174.3%, respectively.

eBay is a stronger player, with a 187% jump in its stock price. Though peers such as VeriFone have also been formulating strategies to combat competition and attract customers, its efforts are not up to the mark. It has recently launched SAIL, a payment processing system for small businesses. The system looks like a good move since it uses social media and many promotional offers to lure customers. Its customer loyalty program can also prove to be effective.

However, VeriFone will be facing stiff competition from eBay’s PayPal Here, which caters to the same market and is already available in some Home Depot’s stores.

NCR Corporation, on the other hand, has been much less active on the innovation front. Nonetheless, it has been picking up the pace recently. It has recently announced its partnership with PayPal, which will help PayPal to expand its physical presence. NCR’s mobile solutions and retail footprint, coupled with PayPal’s technology, will help customers discover a convenient payment system. Growth of PayPal will also help NCR witness growth.

The Takeaway

eBay is very active when it comes to innovation. Also, it has expanded its reach into emerging markets. PayPal’s international expansion will beget huge benefits to the M-commerce company. Moreover, the company has also been a prominent online seller, offering the best deals, delivered in the shortest span of time. If you are willing to bet on these technological advancements with the least risk involved, I think eBay is the best option available. It is an all-round player delivering commendable performances each quarter.


Rating: 2.0/5 (1 vote)

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Comments

gideon137
Gideon137 - 4 months ago

Ebay is a classic "pump and dump" situation. My main concern is that the stock valuations aren't actually based on truthful, factual information provided to stock analysts by eBay because eBay continues to count 40,000-60,000 suspended sellers as registered users, for example, even though these suspended sellers are no longer selling on ebay (most of them no longer buy there either, though they are still "allowed" to buy items on eBay). That's only one area in which artificially inflated numbers are used to pad eBay reports. I am asserting that there is massive fraud on eBay's part at the very level where value is assessed because of fraudulent reports. I am asserting that this needs to be investigated by FTC, SEC and whoever else. And someone did not just sit around and think this up, this information comes from someone who is a former eBay insider, someone previously employed within the corporation at a significantly high level, and for the time being this individual prefers to remain unknown. CEO John Donahoe's Wall Street hype is starting to be seen for what it is, a massive fraud, with class action lawsuits pending against eBay over numerous issues.
Taking a look at five-year period, 2007-2012, eBay repurchased 82 million shares of its stock, but at a net cost (after taking into account shares issued at below market prices) of more than $50 per share.

If by unscientifically "eyeballing" the chart we can agree that instead eBay's stock averaged around $25 per share, then management's behavior (spending more than $4 billion to buy stock at $50 per share instead of $25 per share) cost shareholders about $2 billion dollars.

Also of note, when eBay stock fell to $10 in 2009, the company did not repurchase any shares, preferring to resume purchases when the shares returned to around the $30 level. Notice how low this $10 price seems to an outside investor; yet this is the price - or even lower - at which management routinely issues itself shares.

Indeed, it is easy to get discouraged with a stock like eBay, knowing that you are not playing on an even field with the management, and that you have to invest in the company at market prices while management routinely gets shares at a discount. Not only that, but by issuing itself such discounted shares, management is also lowering the value that the stock has to outside investors who bought the stock themselves with their cold, hard-earned cash."

PhilipCohen
PhilipCohen - 4 months ago

"EBay Is Growing Big"

Seriously?

Notwithstanding that the eBay Dept of Spin likes to claim a “400% increase” in eBay’s stock price since the 2008–2012 global recession, the fact is, in August 2007, immediately prior to the start of the GFC, when the "Pain From Bain", Johnny Ho, was already effectively in control of eBay, the share prices of eBay and Amazon were both ~$40; with eBay recently <$50 and Amazon >$300, clearly, the “smart money” on Wall Street recognises eBay to be a "dog", and Johnny Ho to be a very poor dog handler; relatively speaking, eBay’s “long” stockholders have been going backwards ever since Johnny Ho took the helm ...

I wonder if eBay’s founder Omidyar has ever thought about just how much more fabulously wealthy he might now have been had he not approved the handing over of the control of eBay to the unscrupulous, destructive, incompetent, narcissistic, sociopathic and delusional Johnny Ho? Indeed, had Omidyar, in August 2007, traded in just the ~108 million eBay shares that he still holds today for shares in Amazon, instead of ~$6 billion, his worth would now have been ~$32 billion! Now that, surely, is something for all of eBay's long-suffering "long" investors to think about, is it not? ...

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