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Some investors may be wondering if eBay (NASDAQ: EBAY) is as safe as bet as it seems, following the stock price's decline from a 52-week high of $57 in February 13 to its current level of $54.64, a 4% decrease. Is this a negative sign for the online e-commerce company?

eBay Fundamentals

The release of eBay's first quarter 2013 results in April highlighted what will surely be the future of the company, which will be in mobile payment solutions. PayPal, eBay's payment solution subsidiary, added some five million active accounts from all over the world during the first quarter, bringing the total number of users to 125 million, and generated revenues of $1.5 billion, an 18% increase. Its marketplace customers, meanwhile, grew by nearly four million to 116 million users. The increasing use of PayPal by consumers and merchants both on the eBay site and offline drove net total payment volume to $41 billion, a 21% increase. The share of PayPal to eBay's total revenue was 41%, a figure that is expected to rise further in the future.

But eBay's core businesses also saw growth during the quarter. Revenues increased to $3.8 billion, or a 15% increase from the $3.3 billion reported in the same quarter last year, while profits grew to $829 million for the period, a nearly 28% increase. Earnings per share grew by 14% to $0.63 from $0.55 in the same period last year. However, revenues missed analysts' estimates slightly by $20 million. It is worth noting that the company is gradually moving away from auctions to fixed price transactions as the value of goods sold through Marketplace increased 13 percent.

Domestically, eBay hopes to increase its active user base by allowing third-party sellers to list their products for free on the site and then pay the site a flat sales fee on the final sales price of the item sold. Possibly as a result of this strategy, the company was able to increase the base by 3.9 million new users. As part of its medium-term goals, eBay hopes to reach $300 billion in sales and payments processed through PayPal by 2015.

There was some slight bad news in that eBay's second quarter guidance failed to live up to analysts' expectations. Its Q2 2013 guidance estimated revenue at $3.9 billion and EPS of $0.61-$0.63, which were lower than analysts' forecast of $3.95 billion revenue and $0.66 EPH. This caused stock prices to drag down slightly, despite the fact that guidance for the full year 2013 remained unchanged.

eBay Future Initiatives

EBay is also looking to the future with a whole range of innovative initiatives designed to win market share and strengthen its position in the market. For example, the e-commerce site expected to handle more transactions through mobile devices in the coming years. For 2012, for example, some 4.3 users were introduced to eBay through mobile devices, while eBay mobile transactions reached $13 billion during the year, more than double that recorded in 2011. PayPal, meanwhile, processed close to $14 billion in mobile payments last year, which was almost triple that of 2011. For 2013, eBay and PayPal are expected to handle over $20 billion each in mobile transactions, or a total of $40 billion. The mobile market is a rich one for the company, since consumers are more likely to make impulse purchases online on their smartphones or tablets, since they are always carrying them around.

Mobile devices also provided eBay with a way of penetrating into new emerging markets, as well as those in the so-called BRIC nations (Brazil, Russia, India and China). Cross-border transactions currently make up some 20% of eBay's business, although the company has not done anything to actively court it. EBay's English language site is also the largest e-commerce player in Russia. In the coming years, eBay is exploring ways to make shipping to international destinations easier in order to increase its cross-border transactions.

PayPal is also exploring ways to expand overseas. At present, for example, close to 3,000 Japanese retailers are using PayPal Here, a mobile credit card-reading device, to accept payments. The payment solution has also been included as one of the features of Korean brand LG's smart TV platform, which is available in North America and the UK. In addition, the payment solution wants to increase its offline presence, so that customers of brick-and-mortar stores can also use PayPal to make transactions. It has already entered into an agreement with credit-card issuer Discover Financial Services (NYSE: DFS) that would allow Discover's network of over seven million merchants to accept PayPal. In addition, PayPal also has agreements with sixteen national merchants, including Home Depot and Barnes & Noble, to implement an in-store service that would allow customers to pay for their purchases by typing in a PIN and entering a phone number on payment terminals, rather than having to swipe a card.

The Bottom Line

There really is no reason why you should not buy into eBay now, given how solid its fundamentals are. And it still has a huge potential to grow its business, as there are still many unexplored markets that it can penetrate. The only real concern about the company is that it may have trouble keeping up the pace of its growth. But if it can do that, and there is no reason to believe that it can't, then eBay would make a great addition to your long-term portfolio.

Source: Reasons To Keep eBay In Your Stock Portfolio