Last year, it seemed like eBay (NASDAQ:EBAY) could do no wrong, as the stock soared a sizzling 68%.
Lately, though, things have taken a bit of a downward turn. Since reaching a 52-week high over $57 in early February, the shares have fallen to just over $52 — more than a 6% fall vs. the S&P 500′s 8% gain.
Still, that makes for 45% gains over the past 12 months and still leaves EBAY in the black for 2013. So, does the recent pullback mean the stock is a buy?
Well, there is a lot to like. The company enabled over $175 billion in e-commerce value last year, accounting for 19% of global market share. Ebay is indeed becoming a serious rival to Amazon (NASDAQ:AMZN). Plus, a key to eBay’s success has been its heavy investments in mobile. Smartphones and tablets are rapidly becoming the preferred shopping tool.
But eBay also has other strong businesses that support e-commerce, including PayPal. It has about 123 million active accounts and processed 700 million transactions in Q4.
Interestingly enough, eBay has been aggressive in making PayPal useful for non-online contexts. To this end, the company struck an important deal with Discover Financial (NYSE:DFS), which gave it access to 7 million merchant locations in the U.S., on top of deals with major retailers like Home Depot (NYSE:HD).
Even the marketplace business has been strong, with volume growth of 19% in Q4 (excluding autos). Keep in mind that eBay has been moving away from auctions — which can be cumbersome — to fixed pricing. The company also continues to make improvements to the platform, on both the desktop and mobile devices.
Then again, shares have indeed been weak lately. And for the most part, it’s because there are fears that the company will have a tough time keeping up the pace of growth.
This could actually be the case with mobile, as the hyper-growth phase is probably coming to an end. Keep in mind that for this year, mobile revenues are expected to be over $20 billion. That would translate into a growth rate of 43%. While this is impressive, it is nowhere near the 3x performance last year.
Competition will also likely become a bigger factor. There are a variety of start-ups, like Square, that are getting lots of traction in the payments market. Other players like Google (NASDAQ:GOOG), Amazon and even Facebook (NASDAQ:FB) are getting serious about pushing their own solutions as well.
Plus, there are already some tell-tale signs of a slowdown at eBay. A recent report estimates that same-store sales came in at 8.2% in February, which was the slowest since April 2011.
To top it off, Ebay’s valuation is still a bit pricey thank to last year’s run, coming to about 26 times trailing earnings and 16 times forward earnings. So for investors, it’s probably a good idea to wait before you jump in … if you want to at all. With the recent weakness in the stock, it seems that Wall Street is betting that eBay may have a soft quarter and as a result, more money may come out of the stock.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.”Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.