I added to my position in eBay Inc. (EBAY) today at $27.625. eBay is not within our top 15 largest positions at this time.
eBay is one of the top shopping marketplaces and we personally use them to sell goods from our retail businesses and I make a decent amount of personal purchases and I sell unwanted personal items there as well.
eBay’s Strengths/ Weaknesses
As a seller on both Amazon and eBay I feel that Amazon is obviously stronger overall as well as Walmart for that matter, but there’s there’s room for a few marketplaces and eBay has their niche. While both Amazon and eBay sell both new, surplus and used products, Amazon is seen more as a new product premium marketplace and eBay is seen more as a discount/ surplus and used marketplace. It also seems that eBay has a lot more flexibility with listings and is cheaper for the seller therefore can be seen as easier for sellers to work with.
I have found that different products we sell sometimes sell at better rates on both platforms. We have some products that sell very little on Amazon, but do really well on eBay and vice versa. Therefore, we don’t see any reason to not continue to sell on eBay. Personally, I have found many products I buy cheaper on eBay than on Amazon again most likely due to the ease of listing and lower fees. Amazon seems to be positioning themselves as a more premium marketplace placing breadth of products and higher levels of service/quality above lower prices. eBay can maintain a good market share for those consumers looking for lower prices with maybe a bit more risk of lower customer service from sellers. That being said, I have rarely had issues with sellers on eBay for personal purchases and have found eBay management fairly reactive when needed.
The recent moves by the company to shed off non-essential businesses and focus more on the core marketplace is probably a good way to go. The capital produced can then be used to reinvest in the business or return back to shareholders.
Reason for Opportunity
The recent pullback due to the COVID-19 scare doesn’t make sense to me as it appears that they should be getting more sales with more people going online to buy instead of going to physical stores and those looking for lower prices.
eBay’s valuation looks good:
- Forward PE: 9.13
- PEG: 1.37
- Earnings Yield: 7.61
- Forward Dividend Yield: 2.32%
The PE and earnings yield are great comparatively speaking and the dividend yield has become increasingly attractive like many companies lately.