Ebay Inc: Bleak Guidance, Bleaker Future

So far, eBay’s (EBAY) has had a rough start to the year, with a 13% decline that’s five percentage points worse than the Nasdaq’s year-to-date performance. And the latest earnings report didn’t help things for EBAY stock.

eBay ebay stock paypalFor the fourth quarter, the top line came in flat year-over-year at $2.32 billion, which was also in line with the expectations of analysts polled by Reuters. Full-year revenues clocked in at $8.6 billion, a 2% decline compared to 2014.

Earnings for the fourth quarter and the full year came in at 50 cents per share and $1.83 per share, respectively, which were also in line with analysts’ expectations. For a growth investor like myself, those numbers just aren’t compelling.

Even less compelling is the bleak guidance eBay issued for both Q1 2016 and full year 2016. The company expects earnings of 43 cents to 45 cents per share for the first quarter — 3 cents lower than what analysts were expecting. For the full year, EBAY stock expects $1.82 to $1.87, while analysts expect were targeting $1.98 for FY16.

EBAY Not Keeping Up With Competition

The unimpressive guidance is a reflection of how EBAY is losing its dominance in the online retailing space. When looking for growth in this area, I would mostly lean towards a disruptive company. And to be fair, there’s not much about EBAY stock that could be disruptive in the online retailing space at the moment.

The first thing to worry about with EBAY stock is its crawling growth rate. Here’s something to consider: At the end of year 2000, EBAY stock was about 14% of Amazon (AMZN) in terms of revenues. However, by the end of 2015, EBAY stock is just 8% of Amazon in terms of revenue.

Yes, I know that the PayPal (PYPL) spinoff has hampered revenues, and Amazon has grown substantially in that time. But still, that kind of performance in comparison to a direct competitor is just unimpressive.

And considering that both EBAY stock and Amazon are early movers in the online retail space, with enough time to become undisputed industry leaders, there’s a signal that EBAY stock just isn’t innovative enough. The PayPal spinoff has only made this fact more obvious.

Bleak Future

And as things stand, EBAY stock has a long way to go to effectively compete against Amazon. And I can’t see that happening anytime soon. As I wrote last year, part of the reason is that Amazon has absolutely nailed the online shopping experience in a way that competitors simply haven’t.

EBAY will have to put in an awful lot of effort to ever match Amazon’s product availability. And when I say product availability, I mean both listing and pricing.

As I found when I wanted to buy a Sony Xperia Z3, the best deal on eBay was at a $50 premium to what Amazon offered. If this trend continue to hold, online shoppers will increasingly switch flags, and we might even see slower growth. Yes, that is only one example, but it’s true of many products across almost every category.

Bottom line

Of course, eBay is still a good company that would actually fit perfectly into certain investment theses. However, for investors seeking growth, EBAY stock just isn’t where you should be looking to put your money. You’d find better growth machines out there, particularly Amazon — even at current levels.

As of this writing, Craig Adeyanju did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/02/ebay-stock-not-guidance-bleak-ebays-future-bleak/.

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