EBay’s shares have shed nearly 10% over the past two trading sessions, starting their retreat when former subsidiary PayPal reported late last week that payment volumes associated with the eBay Marketplace business grew by only 3% year over year during the third quarter. Because PayPal is believed to still handle the vast majority of transactions on eBay, analysts took the disclosure as a bad sign for the auction and e-commerce site’s own third-quarter results, due next week. Stifel Nicolaus and Bank of America Merrill Lynch have since downgraded eBay to neutral ratings, citing PayPal’s report.
PayPal’s report also came just a day after eBay filed a lawsuit against Amazon.com . According to eBay, some of Amazon’s sales reps have been illegally using the company’s messaging system to recruit eBay sellers to the Amazon platform. Amazon says that it is investigating the matter but has made no further comment.
At a glance, eBay wouldn’t seem to pose much if any threat to Amazon. The once iconic online auctioneer is projected to generate about $ 10.8 billion in revenue this year—less than 5% of the $ 235 billion Amazon is on track to hit. But eBay’s Marketplace business is still a big draw for sellers; the company says nearly 300,000 are active in its Guaranteed Delivery program that is effectively the company’s answer to Amazon Prime. Third-party sales are a strong driver of Amazon’s recent growth as well as its much-improved bottom line as such transactions carry much higher profit margins than sales of goods from Amazon’s own inventory.
EBay’s business had been improving of late. Gross merchandise volume grew by 10% year over year in the second quarter and by 13% in the period before—the platform’s best sustained growth in four years. But PayPal’s report suggests that this rate is decelerating quickly. Scott Devitt of Stifel Nicolaus now expects eBay’s GMV to grow only 4.4% year over year for the third quarter.
Whether the recent slowdown can be attributed to Amazon remains to be seen. EBay’s shares are now trading at less than 12 times forward earnings, their lowest multiple in more than two years. That makes eBay one of the cheapest stocks to be found in the internet sector.
Investors still have reason to be wary about snapping up an apparent bargain for now, though. As eBay knows well, low bids don’t always win.
Write to Dan Gallagher at firstname.lastname@example.org
Corrections & Amplifications
EBay has nearly 300,000 active sellers in its Guaranteed Delivery program. An earlier version of this article incorrectly stated this was the number of total active sellers. (Oct. 22)