A Fundamental Analysis of Amazon and eBay

Emerging in the 1990s, both Amazon.com (AMZN) and eBay Inc (EBAY) facilitated the expansion of the global electronic commerce sector. Although Amazon and eBay are both multinational e-commerce corporations, eBay is solely a marketplace to conduct business, whereas Amazon is both a marketplace and a retailer.

Formerly just an online bookstore, Amazon expanded into a superstore selling digital media as well as physical products. On the other hand, eBay transformed online marketplace auctioning from what was just collectibles to a significantly larger array of products. Additionally, through its acquisition of PayPal, eBay revolutionized the profile of digital payments, spinning off the business in 2015, further supporting the growth of e-commerce payment platforms. In this article, we compare Amazon and eBay using various sales, profitability, and valuation indicators.

Key Takeaways

  • Investors can evaluate companies such as Amazon and eBay using key performance indicators, such as sales, revenue, profitability, and valuation.
  • As of June 2020, Amazon has significantly outpaced eBay in sales, posting a trailing 12 months (TTM) revenue of $321.78 billion in contrast to eBay's revenue of $10.71 billion.
  • Amazon's net income was $13.18 billion for the trailing 12 months versus $5.024 billion for eBay.
  • Amazon’s forward P/E ratio is also much higher than eBay’s at 128.21 versus 16.98 for eBay.
  • Amazon is also a top investment in comparison to the other FAANG stocks (Facebook, Apple, Netflix, and Google).

Key Performance Indicators

The success of either Amazon or eBay is evaluated by looking at both companies' key performance indicators (KPIs), which can be broken down into four categories:

  • Sales and Revenue: Which company has a higher increase rate?
  • Profitability: Which company has a higher margin?
  • Valuation Metrics: Which company is worth more?
  • Active User Base: Which company has many new versus existing customers?

Sales and Revenue

As of June 30, 2020, Amazon had a trailing 12 months (TTM) revenue of $321.78 billion—an increase of 27.7% from 2019. In contrast, eBay's revenue totaled just $10.71 billion, with an increase of 3.4% from 2019. Over the past three years, Amazon has significantly outpaced eBay in revenue growth with average annual revenue growth of 29.1% versus 3.6% for eBay.

Profitability

As of June 30, 2020, Amazon had a net income of $13.18 billion for the trailing 12 months versus $2.1 billion for eBay. Both companies have seen increases in net income in 2020. Through June 2020, Amazon reported a five-year gross margin average of 38% compared to 70% for eBay.

Meanwhile, five-year average operating margin levels are 4.05% and 23.55%, respectively for Amazon and eBay. eBay also outpaced Amazon in net income growth. As of June 30, 2020, eBay had a trailing 12-month net income growth rate of 109.25% versus 8.93% for Amazon.

Valuation Metrics

Valuation metrics such as the price-to-sales (P/S) ratio and price-to-earnings (P/E) ratio essentially show which company's stock has earned a greater value for investors. As of June 30, 2020, Amazon’s P/S ratio stood at 4.70, whereas eBay's was 3.99. Amazon’s forward P/E ratio is much higher than eBay’s at 128.21 versus 16.98 for eBay. 

Among the FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google), Amazon’s forward P/E tops the list, with Netflix coming in second at 71.94. Amazon also falls in the top quartile of this group while eBay is in the bottom quartile with a group average of 57.97. Based on forward P/E valuation alone, Amazon is the favored investment.

Active User Base

Amazon was the most popular e-commerce marketplace as of Dec. 2018 with over 200 million unique monthly visitors. eBay however, was Amazon’s second-closest rival with approximately 109.4 million unique monthly visitors. Other high traffic competitor sites include Craigslist, Etsy, Walmart, and Overstock.

The Bottom Line

Amazon by far is the bigger corporation, dwarfing eBay in sales and income. Amazon has a significantly higher forward P/E showing greater room for growth. As of Aug. 19, 2020, Amazon traded at $3,260.48 versus $57.71 for eBay.

Amazon has been making investments to become the world’s top e-commerce marketplace and retailer. Its potential is substantially outpacing other specialty e-commerce marketplaces such as Etsy and Overstock. Amazon is also a top investment in comparison to the FAANG stocks, which adds greater credibility to Amazon’s investment opportunity given the valuation metrics of the FAANG group as well.

Article Sources

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