Fear about eBay Inc is its Old-School Image
eBay Inc (NASDAQ:EBAY) just reported, and the results were really not that exciting, despite the company beating its forecasted earnings per share (even if it was only by a penny).
Now, I can’t recall when I actually last visited the eBay Inc merchandise platform. I know I have an account, and my best guess would probably be about 10 years ago when I was buying Pokémon cards for my then-toddler.
eBay stock plummeted about 11% on Thursday after providing a lackluster view toward the all-important fourth quarter. EBAY stock expects revenues to grow four percent to six percent on a foreign exchange (FX)-neutral basis in the fourth quarter, which should scare you, considering that this metric was up eight percent in the third quarter.
Remember, this encapsulates Black Friday, Cyber Monday, and the holiday shopping season, so you can’t blame eBay stock investors for running to the exits.
I’m in the mixed camp. While I think eBay Inc still has a great platform for those wanting to buy and sell used and new goods, I simply don’t think the site is really a hit with the millennials, compared to the boomers and Generation X.
Chart courtesy of StockCharts.com
My Bear Case for EBAY Stock
This issue of disconnect facing EBAY stock is a real concern. Think about it. Unless you are searching for used goods, you are probably going to Amazon.com, Inc (NASDAQ:AMZN) or one of the many other web sites that exist for online shopping.
eBay stock is simply losing its luster. If you don’t believe me, take a look at the eBay Inc results from the past several years.
eBay Inc recorded three straight years of revenues of between $8.25 billion and $8.59 billion, including a decline in 2015. Looking ahead, the growth is muted, at an estimated 4.10% and 4.90%, respectively. This is not exactly the kind of growth eBay stock investors want to see. You can find much superior growth elsewhere.
eBay Inc says it added over 1.0 million active buyers in the third quarter, and now has 165.0 million potential buyers worldwide.
Don’t get me wrong. This is a pretty good user base but, unless those users are actively buying and selling, eBay stock will face continued challenges ahead, as companies like Amazon extend their reach and negatively impact EBAY stock.
I know I’m counted in the user base, but—as i mentioned earlier—it’s been about 10 years since I have visited the site.
Another way to look at it is to view eBay stock’s gross merchandise volume (GMV), a key operating metric that represents how the business is doing.
In the case of EBAY stock, the GMV in the third quarter came in at around $20.1 billion. The growth was five percent on a FX-neutral basis, which is not something that excites me. In fact, the GMV for the past several years has been stuck at around $20.0 billion. This implies a lack of growth, probably due to the likes of Amazon.com.
Now, eBay Inc is far from being passé, but the reality is that, unless it can find a way to fend off online rivals, EBAY stock could eventually face harsher times ahead.