Recent Performance
Last quarter, eBay Inc (NASDAQ:EBAY) saw revenue rise 14% to $3.9 billion, and earnings per share increase 12% to $0.63. E-commerce volume grew by 21%, making it eBay Inc (NASDAQ:EBAY)’s fastest-growing section. These increases come from the double-digit growth that eBay Inc (NASDAQ:EBAY) and PayPal had during the second quarter.
Mobile commerce added 3 million customers to the company last quarter, and eBay Inc (NASDAQ:EBAY) and PayPal are each expected to have $20 billion in mobile commerce and payment volume by the end of 2013. The eBay mobile app allows customers to buy and sell items from their mobile device, and the company partners with other businesses, which allows the mobile platform to be used for ordering items that span from clothing to lunch. With the increasing popularity of smart phones and e-commerce, this area has a lot of growth potential for eBay.
Recently, eBay revealed that it is expanding its same-day delivery service for buyers and sellers who are in the same market. In the past year, the company has tested the service in San Francisco, San Jose, and New York. The expansion is planned to take place in Brooklyn, Queens, Chicago, and Dallas throughout the summer. To be eligible for the service, customers must make orders of at least $25 and pay a $5 fee. The extra cost will allow customers to receive items from eBay partners such as Target and Best Buy in as little as an hour. But whether people are willing to pay extra for super speedy deliveries still remains to be seen.
With these improvements and growth of the mobile market, eBay expects that it can increase the commerce it enables from $175 billion in 2012 to $300 billion by 2013. The company takes a percentage of the commerce it enables and will see earnings rise with it.
Competition
eBay’s competition comes from other online companies like Amazon.com, Inc. (NASDAQ:AMZN) and Overstock.com, Inc. (NASDAQ:OSTK).
Much like eBay, Amazon.com, Inc. (NASDAQ:AMZN) is attempting to succeed in same-day shipping with Amazon.com, Inc. (NASDAQ:AMZN) Fresh. The service offers quick delivery of groceries and other Amazon items like electronics and books. Amazon.com, Inc. (NASDAQ:AMZN) Fresh started in Seattle and expanded to Los Angeles this past June.
Overstock.com, Inc. (NASDAQ:OSTK) is an online retailer that offers discount, brand-name, and non-brand name products. Recently, the company had a successful second quarter with revenue up 22% to $293.2 million. It’s a smaller company than Amazon.com, Inc. (NASDAQ:AMZN) and eBay, but the market is expecting growth from the company as evident from the company trading at 27.57 times forward earnings.
Of these three companies, eBay is currently the cheapest with a forward P/E and PEG of 16.31 and 1.24, respectively. Overstock.com, Inc. (NASDAQ:OSTK) has its P/E of 27.57 and a peg of 1.40 and Amazon.com, Inc. (NASDAQ:AMZN) has a large P/E and PEG of 94.56 and 6.25. Amazon’s ratios are closer to companies that offer instant video streaming like Netflix, Inc. (NASDAQ:NFLX).
eBay has competitively high gross and operating margins of 69% and 21%, respectively. Compared to Amazon’s margins of 25% and 1% and Overstock.com, Inc. (NASDAQ:OSTK)’s 22% and 2%, it’s clear that eBay’s business retains more of its sales than its competitors do.
Conclusion
eBay is primed to take advantage of the growing mobile market. The company is making it easier for consumers to purchase and receive the products they order online. With the expected increase in enabled commerce and the company’s impressive margins, I see eBay stock going up as the company’s image shifts from online auctioning to an online business facilitator.
Ben Popkin 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. Ben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Why This E-Commerce Site Is on the Rise originally appeared on Fool.com is written by Ben Popkin.
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