Strong Earnings Show George Soros is Right on eBay Stock
Billionaire George Soros has made a fortune in technology stocks, and now he’s making another big bet: eBay Inc. (NASDAQ:EBAY). Last quarter, the legendary investor increased the size of his position in eBay stock nearly threefold and today he owns over 3.3 million shares in the Internet auction site. But what could Soros possibly see in eBay? Let’s take a look.
Here’s Why George Soros is Bullish on eBay Stock
George Soros is undoubtedly one of top stock pickers in the world.
The legendary billionaire investor started Quantum, his own investment firm, in 1973, which provided solid annual returns for its investors and guaranteed Soros a spot amongst investing legends such as Warren Buffett.
It’s due to this stellar investment record that I always make sure to keep my eye on what stocks George Soros is buying up. And right now he’s betting big on eBay Inc.
The billionaire’s Soros Fund Management LLC increased its eBay Inc. position by two-and-a-half times. Indeed, Soros’ position on eBay stock rose by 247%, and the company now owns more than 3.3 million shares of the internet-based auctioning site. (Source: SEC Filing, last accessed October 28, 2015.)
With a strong third-quarter earnings report which beat analysts’ expectations, eBay stock bulls such as George Soros look like they were right all along.
But what had caused this turnaround in eBay’s fortunes? As it turns out, the world’s largest internet-based auction platform has been busy with significant internal restructuring efforts in the third quarter of 2015, and the eBay stock price reflects that. The company recognized that eBay, now a fledgling on-demand delivery service, was unprofitable and moved to eliminate it from its business operations. It also engaged in a policy of consolidating several previously disparate standalone mobile applications into one single eBay app. This includes apps dealing with automobile auctions, valet selling, and fashion. (Source: “Why Is Silicon Valley Pouring Millions of Dollars Into Old Clothes?” Bloomberg, October 28, 2015.) The aggregation of these three apps was part of a broader restructuring effort to the core eBay app, which was redesigned with a focus on three major ideas: buying, selling, and monitoring activity.
But there are other moves at play here, such as eBay’s decision to offer a free two-day shipping subscription in Germany, a move which puts it in direct competition with Amazon.com, Inc. (NASDAQ:AMZN). (Source: “eBay launches new speedy-delivery membership, but only in Germany for now,” Venturebeat, September 11, 2015.)
eBay has also moved to sell off its enterprise unit to the tune of $925 million in the fourth quarter, in addition to the company’s stake in India’s e-commerce web site Snapdeal. In less exciting news for some, eBay has announced it will be streamlining operational costs by letting go of more than 2,400 jobs by the end of 2015.
eBay was previously thought by analysts to still need to prove itself capable of expanding. It now appears that the company has been successful in streamlining its business model, and the eBay stock price stands poised to soar.
Third-quarter earnings results for eBay stock were impressive to say the least, with the company’s share price soaring. The internet-based auctioning site reported third-quarter revenue in the range of $2.1 billion, which translates to earnings per share of $0.43. (Source: “eBay’s Third Quarter Results Come In Better Than Expected, Driving Stock Higher,” Forbes, October 23, 2015.)
Chart courtesy of www.StockCharts.com
Analysts and investors alike were banking on eBay posting revenue of $2.09 billion and earnings per share of $0.40. Most impressively, eBay’s gross merchandise volumes (GMV) witnessed a solid six percent rise over the second quarter of 2015.
eBay reported that it purchased approximately $599 million of its own stock through a stock buyback program, which shows a fair amount of confidence in its own business model. Total buybacks planned by the auctioning site will be about $2.4 billion.
The Bottom Line on eBay Stock
While eBay’s expansion has not hit high gear yet, the recent vote of confidence by George Soros gives further uplift to a company which looks to be gaining upward momentum. Last year’s debacle involving the hacking of users’ data, as well as Alphabet Inc.’s (NASDAQ:GOOG, GOOGL) imposition of a penalty for eBay’s Google search optimization strategies, appear to be in the rearview mirror right now as the company prepares itself for the future.
If you’re in need of any further convincing, then look at the recent surge in the eBay stock price. eBay stock has shot up by nearly 17% in value since the release of third-quarter 2015 earnings results. And with the restructuring strategies mentioned above, it stands poised to rise up even further. George Soros certainly seems to agree, as he has increased his position in eBay by more than two-and-a-half times.