Options for eBay Inc (EBAY) in the Americas

As internet penetration and online shopping increase worldwide, e-commerce companies are faced with massive growth opportunities. Although many can benefit from this trend, some market leaders like eBay Inc (NASDAQ:EBAY) seem poised to outperform their peers. However, if you don’t want to go mainstream, other companies offer similar business models and plenty of room for growth. Overstock.com, Inc. (NASDAQ:OSTK) and Mercadolibre Inc (NASDAQ:MELI) are two of these firms, which hold compelling growth prospects in the U.S. and Latin American markets, respectively. Let’s take a closer look at them in order to elucidate if they stand as good investments or not.

Bet on Goliath

eBay Inc (NASDAQ:EBAY) is one of the few companies that doesn’t need an introduction. With a market capitalization of approximately $70 billion, it dominates the e-commerce space comfortably and has become one of the largest retailers in the world. Trading at 25 times its earnings, at half the industry average, while expected to outperform its peers in terms of EPS growth over the next few years, this is a stock to buy and hold on to.

With a wide international presence (in over 40 countries) and 52% of 2012’s revenue coming from overseas markets, emerging economies provide plenty of growth opportunities. As the penetration of the internet grows rapidly in these countries, accompanying the flourishing middle-classes, e-commerce is only bound to succeed.

PayPal (its payment system) and the mobile segment are two other growth catalysts to be taken into account when investing in eBay Inc (NASDAQ:EBAY). PayPal is becoming increasingly popular in both the online and offline segments and a partnership with Discover Financial Services (NYSE:DFS) should further boost its acceptance. The mobile and tablet segment, on the other hand, promises to deliver plenty of upside, mainly on the back of the firm’s user-friendly apps for these platforms.

Finally, diversification will also play an important role in eBay Inc (NASDAQ:EBAY)’s business growth. Adjacent platforms like StubHub and Brands4Friends along with investments in MercadoLibre, Tradeshift, FreshBooks, BillFloat, and Magento will provide plenty of extra growth opportunities going forward.

Not-so-free market

Mercadolibre Inc (NASDAQ:MELI) is the largest online marketplace in Latin America. Calling it the region’s eBay Inc (NASDAQ:EBAY) is not far-fetched, given the fact that this last company owns an 18% stake in MercadoLibre and this last one, in turn, owns the company that used to be eBay’s Brazilian subsidiary.

Most of its revenues are derived from service charges and sales commissions, and from its payment system, MercadoPago, which is very similar to PayPal. Although its presence is quite widespread in the region, Argentina, Brazil and Venezuela contribute with most of the income.