Over 22 years, this stock has grown into one of the most recognized names in e-commerce.
The company continues to upgrade its websites and make strategic deals, like one recent agreement that will lower its costs, and another that could lead to a spinoff. Revenues rose again for the stock in the latest quarter and it trades at a very reasonable level to forecast earnings.
U.S. stocks—the 20% solution
We firmly believe Canadians should have at least 20% of their portfolios in U.S. stocks. Perhaps as much as 30% as the positive results mount up. For three excellent reasons:
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EBAY INC. (Nasdaq symbol EBAY; www.ebay.com) operates e-commerce websites where sellers pay fees to auction items or offer them at fixed prices. The company also operates several other websites, including StubHub (ticket sales). These services are in addition to its local websites (among them Kijiji in Canada); they sell classified ads in over 1,500 cities.
eBay launched its first auction website in September 1995 and now has 171 million users worldwide.
In the three months ended December 31, 2017, the company earned $618 million, up 2.8% from $601 million a year earlier. Due to fewer shares outstanding, earnings per share gained 9.3%, to $0.59 from $0.54.
Revenue for the quarter rose 9.1%, to $2.6 billion from $2.4 billion a year earlier. eBay added 2 million active users to its platforms in the quarter, and now has a total of 170 million users worldwide.
Those gains are largely because the company continues to update its websites. That has made it easier for shoppers to find the items they’re looking for. New features like matching the price of other online sellers and three-day delivery have also helped spur revenue. As well, a new TV advertising campaign helped draw more users during the holiday shopping season.
eBay spent $317 million (or 12.1% of its revenue) on research in the latest quarter. That’s up 8.6% from $292 million (12.2% of revenue) a year earlier.
As of December 31, 2017, the company held cash and equivalents of $5.9 billion; its long-term debt was $9.2 billion, or a moderate 21% of its market cap.
Growth stocks: Dutch firm to supplant PayPal as main payments processor
Under a new deal, Netherlands-based Adyen BV will replace PayPal (Nasdaq symbol PYPL) as eBay’s main payments processor. The switch will lower processing costs for eBay’s merchants. While the Adyen deal begins in 2021, PayPal will also continue to process eBay transactions until July 2023. PayPal took its current form when it was spun off by eBay in 2015.
The company’s StubHub business has formed a new alliance with the National Football League. Under that multi-year deal, starting with the 2018-2019 season, ticketholders can resell their tickets on StubHub’s online platform. That will help cut fraudulent transactions. As well, studying customer data trends will help the NFL develop new pricing strategies and other ways to spur ticket sales.
eBay purchased StubHub in 2007, and it now accounts for 10% of the company’s total revenue. If that business continues to grow, it’s possible that eBay could eventually spin off StubHub, and hand out shares in the new company as a special dividend to its shareholders.
For 2018, eBay expects its revenue (excluding currency rates) will rise 7% to 9%. It also expects to earn $2.29 a share. The stock trades at a reasonable 17.2 times that forecast.
Recommendation in Wall Street Stock Forecaster: Ebay is a buy.
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