3 Reasons to Be Bullish on EBAY Stock
eBay Inc (NASDAQ:EBAY) is one of the oldest and most successful companies on the Internet. However, EBAY stock is down 13.36% from the start of the year. Was that a fair hit for the company to take or is eBay actually trading at a discount to its true value, opening a chance for ambitious investors to make a quick buck?
From my vantage point, it looks like the latter is more probable. The company’s performance stagnated since it spun off Paypal Holdings Inc, but I really think that’s because investors don’t understand where the company is headed.
Most people still think of the company as an old auction-based company. You go on eBay’s site and bid for some used item. Maybe you win, maybe you don’t. Even if you do win, it’ll probably arrive late. That’s the common conception of eBay.
I’m sorry to say, but that vision of the company is grossly outdated. Most of the firm’s products are actually new and sell at a sticker price.
Observers who have watched the shift think that eBay is trying to copy Amazon, but that’s not true either. In fact, it’s pretty much the other way around: eBay is the anti-Amazon.
The customer experiences made by the two companies are completely different and that is actually the best possible thing for EBAY stock shareholders. Plus, the company has three tailwinds that could take its share price sky-high:
In a recent interview, eBay CEO Devin Wenig described his company as a treasure-hunting service, a site where shoppers go to find great deals and unique items. That is not the standard, commoditized goods approach taken by companies like Amazon.com.
“The world doesn’t need an almost-as-good Amazon, it needs a better eBay,” he said. “I’d rather have a billion unique items that arrive in 3 days than a billion commodity items that arrive in 1 hour. That’s our business.” (Source: “Full video: eBay CEO Devin Wenig at Code 2016,” Recode, June 13, 2016.)
What he means is that eBay can only grow by offering customers something they can’t get anywhere else. Since the company has one billion items from 20 million sellers, I’d say eBay is well on its way.
When Wenig became CEO a year ago, he was the only person in the company who wanted to keep StubHub active. Its growth was weak and most people didn’t think it was worth the time.
In the end, Wenig was right. StubHub grew at 34% in the first quarter, reaching $177 million in revenue. After a recent acquisition, it has officially become the largest secondary ticket market in the world. (Source: “StubHub Is eBay’s New PayPal,” Fortune, April 26, 2016.)
Finally, Wenig made it very clear that eBay is not a logistics company. It doesn’t buy warehouses and stock them with items to make sure the company can meet customers’ delivery expectations. It is a data company with an inventory of unique items.
That being said, the company is trying to rebrand itself away from the old auction-company image. Part of that means tightening controls. Last Christmas, two-thirds of all items were delivered within three days and believe me, that was impossible a few years ago. It was only possible then because eBay was playing a bigger role in how each transaction is handled. (Source: Recode, op cit.)