eBay Inc. - Stocks

Instrument description

Electronic commerce or more popularly known as e-commerce is one of the most significant business industry of the world and involves the buying and selling of various products through online methods. eBay is one of the most prominent American e-commerce company that runs an online marketplace and other online platforms that connect numerous buyers and sellers.

The users can also use the online platform to buy, sell, and list products through online, mobile, and offline channels that include retailers, auctioneers, and distributors. eBay is one of the world’s most popular online shopping platform, and the company operates more than 23 international websites, and the services are offered in more than 100 countries. eBay has over 182 million users, and there are close to around 1.3 billion listings of products on eBay’s website. eBay is a multibillion company located in San Jose, California, USA, and the company has a total of 14.000 employees.

History of eBay

eBay was formed in September 1995 by Pierre M. Omidyar and was probably the first auction-based website. Initially, eBay was formed as ‘AuctionWeb’ and was part of a personal website of computer programmer Pierre Omidyar. The first item to be sold was surprisingly a broken laser pointer.

Omidyar ran his website steadily and allowed person to person transactions, but the traffic on the website kept on increasing, and the internet service provider asked Omidyar to upgrade his internet connection. The prospect of subscribing to a more expensive internet connection compelled Omidyar to charge more from his website users. In 1996, the website had processed nearly 250,000 auctions in few categories such as coins, stamps, and computers and at the end of the year there were nearly 15,000 auctions held daily.

In September 1997, the website named was changed from ‘AuctionWeb’ to ‘eBay,’ and Omidyar got a fund of $6.7 million from Benchmark Capital. The funding allowed the company to grow and add a wide range of products that can be sold legally online.

eBay started trading publicly on NASDAQ on September 21, 1998, and the share price was $18. The year of 1998 was also beginning of the Dot-com boom, and eBay shares surged suddenly on the first day of trading and closed at $53.50. In 1998, the company had 30 employees, over half a million users and revenues amounted to $4.7 million. However, the rise did not last long, and the share price reached $12.31 in April 1999.

eBay grew enormously within a few years and had the largest user base for any e-commerce platform. By 2000, eBay had 12 million online users, and there was an average daily inventory of 4.5 million products. Till last year, eBay has over 183 million users and revenue worth $10 billion. In December 2000, the share price of eBay fell as low as $2.81. The price recovered to $6 by September 2002. The share price of eBay next surged and touched $24.92 in December 2004.

A slow decline began again in eBay shares from 2005, and it fell again to a low of $4.17 by March 2009. But since 2009, eBay’s stock has performed excellently and grew steadily to reach almost $47 in January 2018. However, eBay suffered financial losses, and the share price retreated to $26.01 at the end of 2018.

eBay has followed a strict acquisition strategy that has allowed the company to buy dozens of companies to diversify its business portfolio and expand to a wider consumer base. Some of the notable acquisitions include was

• StubHub in 2007
• G-Market in 2009
• Corrigan in 2016
• Flipkart in 2017
• jp in 2018

One of the significant acquisitions for eBay was buying PayPal in 2002, which became the most valuable online payment method in the world. But in 2014, eBay announced to sell the company, and the divestiture was completed in 2015, and PayPal now works as an independent company. eBay also bought a popular online communication system, ‘Skype,’ in 2005, but it was sold to Microsoft in May 2011 for $8.5 billion.

eBay stock value has always experienced constant price fluctuations and volatility. The share price moved in an upward trend from January 2009 to January 2018 and surged from $4.39 to $44.3. But the share price fell suddenly and reached a low value of $26.59 in December 2018. The stock of eBay has split five times.

• One time at 3 for 1 in 1999
• Three times at 2 for 1 in 2000, 2003, and 2005
• Last time at 2376 for 1000 in 2015

Current Business and Investment of eBay

eBay is a world-renowned e-commerce company that provides acquisitions and investments and act as a platform for buyers and sellers, which can be accessed online through desktop, laptop, smartphones, and other mobile devices. eBay has kept its original auction-style sales and introduced various user-friendly features such as ‘Buy it Now,’ Online Ticket Trading, Online Classifieds, and shopping through Stock Keeping Unit (SKU) and International Standard Book Number (ISBN). The platforms that eBay manages are Marketplace, StubHub, and Classifieds.

• Marketplace includes the main website of the company, along with its localized pages and eBay mobile applications.
• StubHub offers online ticket platform along with its localized pages and other mobile applications
• Classifieds segment deals with various brands that include Gumtree, Kijiji, Marktplaats, and mobile.de.

eBay offers Business to Consumer (B2C), and Consumer to Consumer (C2C) e-commerce facilities to online users that includes both buyers and sellers. The buyers and frequent users can use eBay for free while the sellers are charged a certain fee based on the type and quantity of products that are sold.

Risk and Potential in eBay Environment

eBay is a global e-commerce platform that allows easy buying and selling of goods and services. The company provides its services in more than 30 countries, has more than 180 million online users, and the mobile application has been downloaded almost 460 million times. eBay’s mission is to become the favorite place for consumers when it comes to online shopping.

The secret of eBay’s success is that it is a platform that allows everyone a fair chance of getting what they want. The e-commerce platform serves a blessing for small vendors who can reach to the wider consumer base and have an opportunity to sell their products.

There are more than 1.3 billion live listings of products and accessories in nearly every category. The eBay website is searched nearly 2 million times in a week, and the amount of sales cross $6 million mark every year. SWOT analysis is a tool that allows eBay to examine its current performance and both the internal and external factors from which the company can take advantage. The SWOT analysis of eBay is given by

• Strengths

eBay is one of the first entrants in the e-commerce field, and the company has grown over the years by doing strategic acquisitions and divestitures. The services are provided through online auctions, classifieds, and fixed pricing. eBay has a strong international presence and a large consumer base. The company uses artificial intelligence and other advanced tools such as data analytics that helps it to know about consumer preference and needs. eBay has a stable and efficient online payment option, online money transfer, and ticket tracking.

• Weaknesses

eBay has been frequently criticized for its services as many times; consumers have to face or deal with fake sellers who use eBay’s platform to sell their goods that are low on quality. The company has not completely eradicated the fake sellers that hurt the brand image. There is intense competition in the e-commerce market, and eBay does not have a physical presence to increase its sales. eBay is only accessible through the internet, and online platforms and any technology malfunction can disrupt the entire online sales and order placements.

• Opportunities

eBay can find ways to include the places that do not have internet access as it can increase the consumer base, and similar techniques can be applied to attract consumers who still are apprehensive about online shopping. eBay can partner with companies and offer bulk selling. Most of the shopping is done through mobile devices so that eBay can introduce value-added features for mobile users.

• Threats

One of the crucial factors that hinder the progress of eBay is the growing number of online frauds and security breaches. The e-commerce industry has become quite saturated and dynamic, and eBay faces constant competition from rival brands such as Amazon, Alibaba, Tesco, Target Corporation, Walmart, Carrefour, Kroger, Olx, and Snapdeal. The government regulations and tax policies can also limit the profit margins for eBay.

Stock Analysis of eBay

eBay is listed and actively trades on the NASDAQ with the ticker symbol ‘EBAY.’ The company is listed under the ‘Consumer Services’ Sector, and the industry is ‘Other Consumer Services.’ eBay is also a member of other indices such as NASDAJ-100 Index, NASDAQ Composite Index, S&P-100 Index, and S&P-500 Index.

The all-time high share price of eBay was $66.29 on July 17, 2015, and the average price in the last 52 weeks is $39.94.

eBay stock value performed modestly in 2019; the share price started at $30 in January 2019 and kept fluctuating throughout the year from $25 to $40. The share price at the end of the first quarter in 2020 was $31.52.

The stock value of eBay surged in June 2020, and the shares are up 69% over the three months. The expected revenue is around $2.75 to $2.8 billion. There is also an expectation of an increase in adjusted earnings per share in the range of $1.02 to $1.06. The share price is performing better than expected and well above its 50-day and 200-day moving averages. The company announced that around 6 million users joined the eBay platform in April and May and that included new users and old users who have reactivated their account.

The number of sellers is also rising, and tens of thousands of big and small sellers are added to the eBay platform since March 2020. The Classifieds segment is performing superbly, and the company is making new investments in technology and marketing to retain new users and also increase the number of sales. The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.