If you'd be asked to come up with things that are related to online shopping, then you'll eventually mention eBay (NASDAQ:EBAY). Well, it's safe to say that the company really has become synonymous with the web-retail scene, and that's why some investors don't even think twice before adding eBay to their portfolios. Since you're among those who analyze their "opportunities", you're still pondering one important question: is the online-shopping giant really an excellent pick?
What's Obvious Enough
To make a proper decision about eBay, it's crucial to first think about its capability to grow. After all, even though the biggest companies aren't expected to be at par with startups when it comes to boasting sales-percentage improvements, such key industry players still need to prove that they're steadily expanding. Currently, eBay has a YoY Growth of 14.10%. While that might seem good enough, it's important to highlight this fact - its competitors have much better numbers. Amazon (NASDAQ:AMZN) for example, has a YoY Growth of roughly 22.00%.
Rest assured, eBay has lots of supporters among investors. That's why many would probably say that the company has an impressive P/E Ratio - much more remarkable than that of Google (NASDAQ:GOOG). While that's true (since eBay's P/E Ratio is currently at 26.25), it wouldn't be fair to compare the online-retail firm with one that's not among its closest rivals. So, instead of comparing its P/E Ratio with Google's, it's much more suitable to see how it matches up to Overstock's (NASDAQ:OSTK). Well, Overstock's 31.96 does look nicer than eBay's 26.25.
About the Selling Game
At this point, one thing should already be clear. Despite eBay's record as a highly-recommended choice for investors, it's no longer at the top of its industry in certain aspects. The once unrivalled champion of the online-shopping world is finally facing stiff competition. Aside from having to contend with Overstock and even Etsy (a private firm that's pretty much like eBay during its early days), the web-retail giant might soon have to go face to face with a much bigger threat - Facebook (NASDAQ:FB). Simply put, the king of social media might soon reveal its PayPal alternative.
You're probably wondering why that would be a problem. Just so you know, eBay owns PayPal. That means that if ever the payment-processing business would suffer a serious blow - from being left out of the countless transactions that happen across Facebook - then its parent company would end up getting hurt as well. Even if the social site's PayPal alternative wouldn't materialize (or ends up being something different from what's mentioned in rumors), it's obvious that more and more people are trying to avoid the payment processor after reading frightening (but familiar) tales.
Thinking of Stock Woes
It's only appropriate to say that eBay (and even PayPal) probably lacks direction when it comes to tackling its toughest competitors and satisfying its clients. Obviously, that's not a good sign. While the online-shopping giant isn't just failing to effectively compete, it's also having a hard time pleasing investors who really think about what they should be getting and what a company shouldn't be doing. To be a bit more specific, some are beginning to notice eBay's underhanded buybacks, which clearly aren't for boosting value but are actually for employee compensation.
As you might already know, distributing stocks in that manner would cause two kinds of problems for those who'd choose to invest in eBay. First, people who'd put their money into the web-retail firm won't get what they deserve, especially since the net income wouldn't be solely divided among them - the employees are also added into the equation, thus lowering the resulting Earnings per Share. In addition, eBay's employees have better risk protection than investors do, since the company lets their own people trade valueless stocks for those that still have worth.
On the Right Thing to Do
After reading about all those things, you've now realized that the often buy-rated eBay isn't as impressive as many believe it to be. Even its stability might soon be in question, especially since its rivals in the e-commerce industry are beginning to step up. Of course, there's also the possibility that Facebook might fight PayPal for payment-processing supremacy. So, while it's still right to say that eBay isn't the worst choice for investors like you, it's also true that looking for another long-term option might be a much smarter move for now.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.