eBay (NASDAQ:EBAY) is one of the leading global technology companies. It offers services such as online shopping and electronic payment provider services, through its PayPal business. However, the company is facing a number of problems such as, threat from other competitors and some mistakes which are hampering its sales. The online retailer is expected to report its second quarter results this week, on Wednesday. Let us take a look at what it expected from the company.
Analysts expect eBay to register revenue of $4.38 billion, a jump of 13% over last year. The top line in the year ago quarter stood at $3.88 billion. Further, earnings are expected to be at $0.68 per share, higher than the prior year’s bottom line of $0.63 per share. Hence, it is clear that analysts are bullish about the company and expect growth in its key metrics. Moreover, the online retailer had beat the estimates in the last 3 quarters, out of the last 4 quarters of earnings release.
- Warning! GuruFocus has detected 5 Warning Signs with EBAY. Click here to check it out.
- EBAY 15-Year Financial Data
- The intrinsic value of EBAY
- Peter Lynch Chart of EBAY
Moreover, its PE multiple is at 17.28, lower than the industry multiple of 31.31. The PEG ratio for eBay is the same as that of the industry and is at 1.40.
Although eBay has been a great player, it has been facing stiff competition from online giants such as Amazon (NASDAQ:AMZN). Amazon’s wide variety of products and a much larger presence, on a global basis, gives the company a competitive edge over the smaller player eBay. Also, Amazon’s stock price performance has been much better than that of eBay. If we consider the change in stock price of both the retailers in the last one year, Amazon comes out as a clear winner. Its stock price has appreciated 12.6%, whereas eBay’s share price plunged 9.7%, in the last one year.
Furthermore, Amazon’s new product verticals and its distribution network pose a threat to eBay. Amazon provides same day delivery of the ordered goods. This particular service attracts a lot of customers to its website. Moreover, there are other players such as Alibaba, which is planning to expand its presence in the North American market. It has recently launched its U.S. website, called 11main.com, which will help Alibaba in growing its presence in the American market. In fact, Alibaba’s Gross Merchandise Volume ($250 billion), is much higher than that of Amazon and eBay combined, which is around $180 billion.
Also, eBay announced that it suffered from a data breach of $145 million users as hackers broke into its networks. This led to a loss of login names and passwords of the registered customers. Hence, people had to change their passwords.
Making its way
However, eBay is trying to overcome the obstacles by making its business stronger. It has made some acquisitions to expand its business. The online retailer bought Braintree, a payment gateway company, in December 2013. In fact, it has recently launched a developer kit, which will help customers to pay easily through their mobiles. In fact, the tool will help retailers to deduct their bills directly from customers’ PayPal accounts, eliminating the need to type credit card details.
Also, it has acquired PhiSix in February this year. PhiSix is a company that develops 3-D visualization and simulation technologies for clothing.
Additionally, PayPal is a market leader in mobile payment technology space, which should help eBay outpace its peers in this segment.
Online retail and electronic payment have become part and parcel of life. People cannot do without it and are highly dependent on its use. Therefore, retailers such as eBay, who specializes in both, have a bright future. Further, its efforts should also enable it to register growth. Nonetheless, the data breach might hamper its results, for the time being, and will take some time to come back to normal. Hence, this quarter might get affected by the unusual event.