Business overview: An investor's essential guide to eBay (Part 6 of 6)
eBay has a P/E ratio of 25.5x, which is higher than the peers in the ecommerce and retail space with the exception of its closest rival Amazon (AMZN). Amazon has a huge P/E ratio despite the stock seeing a sell-off post-earnings announcement, as the company missed estimates. eBay’s profit margins, operating margins, and gross margins are higher than its peers.
eBay posted $16 billion in 2013 revenue, a 14% increase over 2012. “We anticipated accelerating second half growth, which did not materialize, so we ended the year at the lower end of our guidance,” CEO Donahoe said on the earnings call. The company had forecast a cautious outlook for the holiday season due to “decelerating U.S. e-commerce growth rate.” The company’s 1Q 2014 guidance were below analyst estimates. eBay estimates sales of $18 billion to $18.5 billion for 2014. For 2015, the company lowered forecasts to $20.5 billion to $21.5 billion from $21.5 billion to $23.5 billion.
In January 2014, the company’s board of directors authorized an additional $5 billion stock repurchase program. Together with the $640 million remaining under the company’s prior stock repurchase program authorized in June 2012, the company’s total repurchase authorization as of January 22, 2014, is $5.6 billion.
Research firm Forrester estimated last year that in the U.S., online retail sales will reach $370 billion by 2017, up from $231 billion in 2013—a 10% compound annual growth rate (CAGR) over the next five years. eBay and its ecommerce peers are poised to benefit from this trend. The space has seen intense competition with the entry of brick-and-mortar retailers’ e-commerce websites. Retailer Wal-Mart last year said its online sales for Walmart.com and international e-commerce sites increased 30% in the first half of 2013. Analysts expect a healthy growth on the back of PayPal and mobile, and contend that a spin off of the unit is unlikely as PayPal accounts for as much as half of eBay’s $70 billion market value.
Browse this series on Market Realist:
- Part 1 - eBay: An investor’s guide to the world’s largest marketplace
- Part 2 - Initiatives in eBay Marketplaces have been slow growth drivers
- Part 3 - PayPal is eBay’s fastest growing business
- Investment & Company Information