The third unit is GSI Commerce, which eBay acquired last year. GSI develops, builds and runs online shopping sites for companies, and with the acquisition, eBay extended the reach of its merchant services segment by adding GSI’s e-commerce client base, which includes 180 retailers and prominent brands like Ralph Lauren, Victoria’s Secret, and Dick’s Sporting Goods (NYSE:DKS). GSI offers its clients enhanced payment capabilities, wider geographic reach, and access to developing e-commerce trends.
Heading the Right Direction
Over the last few years, when many Internet stocks staged big comebacks, EBAY has lagged as consumers shifting away from the auction business, which represented 37% of marketplace volumes and 25% of total revenue in 2011.
But now, eBay is on the right track to reinvigorate growth through new platform innovations. The company has overhauled its marketplaces to accommodate the fixed prices (63% of marketplace volumes and one- third of total revenue) through improved search, free shipping, mobile applications as well as complementary acquisitions (including local shopping and private sale sites).
This all adds to the company’s status as formidable e-commerce player, and eBay has regained a grip in categories like trendy and higher-end clothing. Other categories should experience a similar lift.
Strong evidence that eBay is heading in the right direction can be seen in the most recent earnings report, which showed promising signs of growth and acceleration in both payments and marketplaces. Revenues in the first quarter were $3.3 billion, up 29% from the previous year and 35% from the prior quarter, and exceeded Wall Street’s expectations for $3.2 billion. The company earned $0.55 a share (non-GAAP), solidly ahead of estimates of $0.51.
Management raised 2012 fiscal-year guidance from revenues of $13.7 billion–$14 billion to a range of $13.8 billion–$14.1 billon, despite the sale of Rent.com. Even with the slight increase, I expect the company to exceed guidance, barring severe weakening in Europe.
The buzz on the Street is also along these lines, with a number of analysts saying the growth in both payments and marketplaces points to a current “significant discount” to eBay’s peers.