Shares of eBay Inc. EBAY touched a 52-week high of $39.77, eventually closing a bit lower at $38.57 on Jan 04. The stock has gained 28.5% year to date, substantially outperforming the 20.7% rally of the S&P 500.
The outperformance can be attributed to eBay’s focus on core assets, growing number of partnerships and acquisition, commitment to enhance user experience, opportunities in the fast-growing mobile space, international expansion and a strong balance sheet.
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Focus on Core Business
eBay focuses on growing its sellers and active buyers, mainly small- and medium-size merchants, which constitute about 70% of the global retail market. We believe that the standalone eBay offers a convincing opportunity with a desirable marketplace format that has better margins, greater capital efficiency and no inventory risks than most retailers.
Alliances Aid Growth
Meaningful partnerships are crucial to the company’s growth. eBay entered into several partnerships in year 2017. On Dec 20, 2017, the company teamed up with Openbay to provide millions of automotive parts and accessories on its online marketplace for auto repair and service. With eBay Motors’s help, businesses can research, source and acquire automotive parts directly through the Openbay dashboard.
eBay has been taking several measures to fuel growth in its Marketplaces business. The company recently accelerated its partnership deals to boost its Marketplace. eBay partnered with Spring on Sep 13, 2017 to offer a wide range of apparel and accessories through ebay.com. The company is offering daily deals on Facebook’s Mobile Marketplace and getting access to the latter’s huge user base in return.
With Shopify, eBay launched a new sales channel on Jul 13, 2017, an integrated platform that allows Shopify sellers to synchronize inventory information, sell products ordered on eBay and view eBay buyer messages directly from Shopify accounts. This is helping eBay to gain access to sellers on Shopify sellers.
User Experience Enhancement Through AI
eBay’s interest in artificial intelligence (AI) is constantly growing. It has accelerated its AI efforts through structured data, personalization, image search technology and customer support effort in several areas. The company is leveraging on its structured data and AI strength to build product catalogs, enhance mobile platform, roll out new browse inspired shopping journeys, enhance customer-to-customer (C2C) business and strengthen its brand.
eBay’s 60th acquisition, Terapeak, acquired on Dec 13 2017, crunches data related to supply, demand and pricing. Its platform helps companies to decide what to sell and how to price it. The company also acquired Expertmaker and SalesPredict to strengthen its artificial intelligence, machine learning and structured data efforts. eBay also acquired Corrigon Ltd., which contributes significantly to its Marketplace platform's structured data initiative. The company also acquired Ticket Utils and TicketbiS, both of which are helping the company to improve seller tools.
These initiatives continue to boost eBay’s unique capabilities and give it an edge over competitors.
Strong Balance Sheet
eBay had around $6 billion in cash and short-term investments at the end third quarter of 2017. eBay consistently converts a portion of the cash on hand to investments. Notably, the company utilized surplus cash balance to make acquisitions in 2017.
Zacks Rank & Key Picks
eBay has a Zacks Rank #3 (Hold).
Micron Technology MU, Broadcom AVGO and NVIDIA Corporation NVDA are some of the better-ranked stocks in the broader technology sector. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Micron, Broadcom and NVIDIA is currently projected to be 10%, 13.75% and 10.3%, respectively.
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