This e-commerce stock continues to profit from its own website and the online sales of its subsidiaries.
A multi-year deal with the National Football League could add to the appeal of its ticket-selling subsidiary as a potential spinoff. In the meantime, the company continues to update its websites to attract new users, and expand its markets, most recently in the Persian Gulf.
U.S. stocks—the 20% solution
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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. eBay launched its first auction website in September 1995. 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 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.
In October 2017 eBay’s StubHub business 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. Ticket sales are underway as the league’s full slate of exhibition games begins today.
Under a new deal announced earlier this year, Netherlands-based Adyen BV will replace PayPal as eBay’s main payments processor (eBay spun off PayPal as an independent company in 2015). 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.
In June 2018 eBay formed an alliance with Dubai-based Noon.com. That e-commerce website operates in several Middle Eastern countries, including Saudi Arabia and UAE.
Under the terms of the deal, eBay will make available products from the U.S. and other countries to Noon.com shoppers.
Teaming up with Noon.com should let eBay tap into rising interest in online shopping across the Persian Gulf. The region’s e-commerce sales will likely double by 2020.
Growth stocks: Company adds 4 million active users in the latest quarter
In the three months ended June 30, 2018, the company earned $533 million, up 7.7% from $495 million a year earlier. Due to fewer shares outstanding, earnings per share jumped 17.8%, to $0.53 from $0.45.
Those figures exclude unusual items such as a gain on investments. On that basis, the latest earnings beat the consensus estimate of $0.51 a share.
Revenue for the quarter rose 9.1%, to $2.64 billion from $2.42 billion a year earlier. However, that missed the consensus forecast of $2.66 billion.
eBay spent $352 million (or 13.3% of its revenue) on research in the latest quarter. That’s up 12.5% from $313 million (12.9% of revenue) a year earlier.
eBay added 4 million active users to its platforms in the quarter. It now has a total of 175 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 seek. New features like matching the price of other online sellers and three-day delivery have also helped spur revenue.
For all of 2018, eBay expects its revenue (excluding currency rates) will rise 6% to 7%. It also expects to earn between $2.28 and $2.32 a share. The stock trades at 14.9 times the midpoint of that forecast. That’s a particularly attractive p/e, as eBay spends a high 17% of its revenue on research.
Recommendation in Wall Street Stock Forecaster: eBay is a buy.
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The technical indicators show that ebay may not have hit bottom yet. I’d wait for it to show signs of life before buying.