Should You Invest in eBay?

PHOTO CREDIT: eBay

OVERVIEW

eBay Incorporation operates an e-commerce marketplace around the world. The company lets sellers put products on eBay.com which any potential buyers can view and buy or bid on the products. The company is based in the United States and was founded in 1995.

Why you Should?

1. The COVID-19 Pandemic has boosted the sales of products on eBay as consumers spend more money and time shopping online instead of going in-store to shop. Small businesses who have had to close their brick and mortar storefronts have opened up new ones on eBay to sell products through these tough times. This shift in consumer trends has benefited eBay.
2. eBay holds its place in an increasingly popular e-commerce industry. As this industry continues to grow in value in the future, eBay will see strong sales volumes on its site. This will increase the company’s revenues and profits and will help its future growth.
3. eBay looks for strong sales during this upcoming holiday season as shoppers will buy more goods online instead of going in-person to shop at stores. This will benefit eBay’s already busy holiday shopping season and will help the company’s future growth.

Why You Should Not?

1. eBay has seen growth start to slow in key markets over the past couple of financial years before this pandemic. This has caused the stock price to grow at a slower rate than its other e-commerce counterparts, like Amazon and Walmart. The company looks to turn this growth around and the COVID-19 Pandemic is one way for the company to speed growth up.
2. eBay faces tough competition from companies like Amazon, Walmart, Shopify, and many other retailers and e-commerce companies. This competition has resulted in weaker growth for eBay and this might continue to stifle growth for the company in the future.
3. eBay continues to face scrutiny over the security of its e-commerce platform. There have been several reports of consumers getting scammed and unknowingly buying stolen products of the companies platform. This might hurt the company’s future growth as they will need to heavily spend to prevent scams and stolen products from being sold on the site.
4. eBay has seen rising revenues over the past couple of financial years but has also seen a drop in profits as well. This drop in profits will hurt the company’s future growth. However, the company looks to see strong profit growth this year due to the COVID-19 Pandemic and the other factors mentioned above. In the financial year of 2019, the company reported revenues of around 10.8 billion and profits of around 1.8 billion. In the financial year of 2018, the company reported lower revenues at around 10.75 billion but higher profits at around 2.53 billion dollars due to stronger sales numbers.

PHOTO CREDIT: Yahoo Finance

MY OPINION

In my opinion, I think that eBay is a good long-term investment if they can turn the weak operating numbers around. The COVID-19 Pandemic will definitely help them do this. However, strong competition, security concerns, and other factors might impede this company in the future.