Regardless of that, the company is still delivering sound operational performance, and that will be reflected in earnings growth for investors sooner or later.
The Business
Amazon.com, Inc. (NASDAQ:AMZN) is the market leader when it comes to e-commerce, but eBay has made an impressive comeback with its marketplace operations over the last years. The company has revamped its technology, improved its search capabilities and increased its focus on fixed-price offerings as opposed to the older auction method.
Amazon.com, Inc. (NASDAQ:AMZN) will most likely continue outgrowing eBay due to its aggressive competitive strategy, but the e-commerce industry will have room for more than one relevant player, and eBay is quite comfortable in the second position.
Besides, Amazon and eBay are taking opposite sides when it comes to their relationship with brick and mortar retailers. Traditional retailers are seriously threatened by Amazon.com, Inc. (NASDAQ:AMZN) since the online retailer is stealing market share away from them. eBay, on the other hand, is an e-commerce facilitator building a bridge to the online world, so brick and mortar retailers have powerful incentives to befriend eBay in this competition versus Amazon.
When it comes to digital payments, eBay is the front runner in a business with enormous long-term potential. With 132 million digital wallets in the cloud, availability in 193 countries and strong brand recognition, PayPal has powerful competitive advantages.
The company is rolling out a new deal with Discover Financial Services (NYSE:DFS) to potentially bring PayPal to more than 7 million merchant locations across the U.S., and maybe to millions of international locations in the future. This agreement could be a massive opportunity for PayPal, even if it manages to capture a tiny portion of the addressable market under this deal.
Discover Financial Services (NYSE:DFS) has been expanding in emerging markets via the acquisition of Diners Club International, a global closed-loop network, and it has reached agreements with banks in China and India to expand its operations. The deal with PayPal looks like a win-win situation for both companies in terms of integrating their networks and creating growth opportunities for both parties in the middle and long term.
As PayPal continues gaining acceptance among merchants, customers and partners, eBay is in a privileged position to benefit from the online payments boom for years to come.
Bottom Line
In terms of underlying fundamental strength and long term growth prospects, the bull case for eBay is as strong as ever. If anything, the recent pullback represents a buying opportunity to place a bid for this high-quality growth company at a discounted price.
Andrés Cardenal owns shares of Amazon.com. The Motley Fool recommends Amazon.com and eBay. The Motley Fool owns shares of Amazon.com and eBay. Andrés is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article The Right Time to Buy eBay originally appeared on Fool.com is written by Andrés Cardenal.
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