eBay: Long-term trends are positive
Shares of online platform eBay Inc. (EBAY) are trading more than 43% below 52-week highs, is one of the lowest rates in the last five years. eBay quotes are under pressure from the general situation when visitors return to traditional stores. However, the trend toward increasing online purchases may positively impact eBay’s long-term prospects.
eBay’s business model allows it to remain profitable and more flexible in making decisions. The platform does not own its inventory for online sales or delivery services. Instead, the company is the link between buyers and sellers. Thanks to this, eBay increased its operating profit margin from 20.25% in 2012 to 28.05% in 2021. Revenue and profit at this time were more volatile due to acquisitions and sales. Nevertheless, over the past decade, eBay’s earnings per share have increased by an average of 23.6% per year.
The resumption of the economy has slightly changed buyers’ priorities, and many began to shop online less often than a year ago. In the first quarter of 2021, when it was at its highest, the gross value of eBay goods went down for five quarters in a row. The sales volume decreased by increased commission fees that eBay receives from each transaction on the platform. This indicator increased from 10.3% in the first quarter of 2021 to 12.4% in the second quarter of 2022.
On average, the company receives an additional $2 million in commissions for every $100 million in sales. eBay earned $2.3 billion in commissions from gross merchandise sales for the June quarter. Although customers have returned to regular stores again, the long-term trend for the development of online commerce has not changed. According to Statista, the share of online shopping in the US will grow to 22% in 2025 from 14% in 2020. Therefore, although eBay has lost market capitalization in recent months, in the long term, it remains one of the primary beneficiaries of the continued strengthening of the e-commerce market.
