eBay Inc
NASDAQ: EBAY
COMPANY DESCRIPTION
Management has sold the enterprise
business and classified it as discontinued operations. The company has been
reduced to its core marketplaces operations, post the Enterprise divestment and
PayPal spin-off.
eBay now intends to focus on
growing its 168 million active buyers further, mainly small- and medium-size
merchants, which constitute about 70% of the global retail market.
The company sells under both the
fixed-price and auction-style formats. Under the auction-style system, the
seller fixes the minimum price, but sells to the highest bidder.
Since eBay is an online
marketplace, almost any retailer — traditional, online or shopping networks
operating in consumer to consumer, business-to-business, or
business-to-consumer formats — may be considered a competitor.
RECOMMENDATION
We rate eBay
Inc. a BUY. Below are the basic reasons to recommend this stock as a BUY.
· eBay
is very well positioned to take advantage of the changing ways in which
consumers shop. The company offers an online marketplace where
any given day, there are millions of items across thousands of categories for
sale. The retailers are now being wooed by the online platform with all kinds
of tools to build an effective online business. Moreover, the divestiture of
Enterprise is further helping eBay’s management to focus on the core
marketplace business.
· eBay’s
is progressing well with replatforming and brand enhancement
initiatives. The company continues to strengthen its core platform
and improve user experience. The company is leveraging on its structured data
and Artificial Intelligence (AI) strength to build product catalogs, enhance
mobile platform, roll out new browse inspired shopping journeys, enhance
customer-to-customer (C2C) business and strengthen its brand. It accelerated
its AI efforts through structured data, personalization, image search
technology and customer support effort in several areas. These initiatives
continue to boost eBay’s unique capabilities and give it an edge over
competitors such as Etsy, Alibaba and Facebook.
· eBay’s push
into mobile paves the way for continued growth in the future. Mobile
commerce volumes have been growing rapidly in recent quarters helped by several
mobile apps already available and several others (for specific shopping
verticals) along the way. Despite the very strong growth in mobile users, their
relatively low contribution to volumes is because they are mainly a younger
demographic, often located in various emerging markets. To revamp mobile
experience, eBay is continuously redesigning its mobile apps for improving
their speed and usability. The mobile platform also pushes up auction rates,
since mobile alerts are particularly helpful in this regard and help a buyer to
stay in contention for a longer period. eBay also united the mobile experience
across platforms enabling a consistent user interface that is already resulting
in faster product iteration.
· eBay
has spun off PayPal, the payments business that has contributed
most of its growth in recent times. This is helping the two businesses focus on
their respective opportunities. eBay will also benefit, because although its
growth rate has come down, the company will be able to reinvest the money it
was putting into PayPal to further its own growth plans. eBay now intends to
focus on growing its sellers and active buyers, mainly small- and medium-size
merchants, which constitute about 70% of the global retail market. We believe
that the standalone eBay offers a convincing opportunity with a desirable
marketplace format, which has better margins, greater capital efficiency and no
inventory risks than most retailers.
· The
company has introduced several measures to fuel growth in its Marketplaces business.
It offers a local feature, which allows a customer to buy something online and
then pick it up at a local store when convenient. Amazon is already doing this
and aside from increased customer satisfaction (because of the added choice),
it lowers shipping costs. The company recently accelerated its partnership
deals to boost its Marketplace. eBay partnered with Spring to offer a wide
range of apparel and accessories through ebay.com. The company is anticipated
to benefit from added selection of luxury brands. Moreover, the company is
offering daily deals on Facebook’s Mobile Marketplace and getting access to the
latter’s huge user base in return.
· eBay
has been active on the acquisition front. Last year, the company
acquired Tera peak. Its platform helps companies to decide what to sell and how
to price it. The company also acquired Expert maker and Sales Predict to
strengthen its artificial intelligence, machine learning and structured data
efforts.
· eBay
continues to revamp seller policies to help small- and
medium-sized sellers and better reward those who provide great service to
buyers. The company is also allowing sellers to tailor the way they manage
returns based on their specific business needs with as much involvement from
eBay as they desire. In Aug 2016, it launched Seller Hub, which consolidates
sellers’ listing and marketing tools and deep data insights and selling
recommendations into one place. The platform allows professional sellers to
manage end-to-end business on eBay. It also focuses on areas designed to drive
more engagement from consumer sellers. For instance, the company is growing its
intermediated selling service, eBay Valet.
· Two
of eBay’s adjacent platforms — Classifieds and StubHub —
greatly complement eBay’s core. Its Classifieds portfolio provides a very
important way to capture the local Customer-to-customer opportunity, which
often represents customers who are selling items more suited to a local
transaction. So far, Classifieds has seen handsome growth in the U.S., the U.K.
and Germany. StubHub, the tickets vertical, also delivered solid results. It is
the industry-leading secondary ticket marketplace. This strong performance was
driven by improvements in product experience. StubHub is also growing in key
international markets where opportunity is just beginning to hit its stride. In
September, eBay launched StubHub in Germany, its second major international
market after the U.K.
· The choice
of formats offered by eBay distinguishes it from other online
marketplaces and helps it stem sales losses. This means that a person looking
to buy an item on the eBay marketplaces not only has the choice of several
brands, but also the option of purchasing them second-hand, through auction.
This is a unique feature that distinguishes the company. Sellers of
collectibles and rare goods also gain, since they can bargain for a higher
price. Although it may be expected that the fixed-price format will continue to
make headway given the fact that it is the prevailing system in the market,
management does not expect to remove the auction format altogether. We view
this as a positive for two reasons. First, it gives buyers numerous choices and
therefore influences revenues. Second, it has a positive impact on average
selling price (ASP), and thus margins.
· As
a strategy to defend its market share against growing competition, eBay keeps
doors open for technology partnership with offline peers. We
are optimistic about this move and believe that this can become one of the
important growth drivers for eBay soon. E-commerce growth, increased smartphone
usage and “24/7” shopping opportunity are believed to be the major growth
drivers for eBay in the long term.
· eBay
has a strong balance sheet. The company had around $5.9 billion in
cash and short-term investments at the end of 2017. eBay consistently converts
a portion of the cash on hand to investments. Notably, cash and short-term
investments at the end of 2017 were around 23% of total assets. Therefore,
further expansion through acquisitions is possible.
LAST EARNINGS
eBay Inc.’s second-quarter 2018earnings surpassed the
Consensus Estimate by 2 cents, while revenues missed the same by a slight
margin.
Gross revenues of $2.64billion increased 9.1% year
over year (up 6% on an Fx-neutral basis) and were at the lower end of the
guided range of $2.64-$2.68 billion. Revenues missed the Consensus Estimate of
$2.66 billion.
Disclaimer:
This Interim Financial Results & News
posts or updates includes forecasts, projections and other predictive
statements that represent Vtrade's assumptions and expectations in light of
currently available information. These forecasts, etc., are based on industry
trends, circumstances involving companies and other factors, and they involve
risks, variables and uncertainties. The Group’s actual performance results may
differ from those projected in these Interim Financial Results. Consequently,
no guarantee is presented or implied as to the accuracy of specific forecasts,
projections or predictive statements contained herein.
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