E-commerce has been a bit mixed with regards to earnings in the second quarter. Amazon.com, Inc. (NASDAQ:AMZN), eBay Inc (NASDAQ:EBAY), and Overstock.com, Inc. (NASDAQ:OSTK) are considered by most to be the top three e-commerce companies in the market. However, in what order?
#3 Slowed growth & weak guidance doesn’t suggest opportunity!
After earnings, eBay Inc (NASDAQ:EBAY) is presenting the worst investment opportunity of the major e-commerce sites. Aside from missing Q2 expectations with revenue growth of just 14% year-over-year, the company also issued revenue and EPS guidance that was significantly below the consensus.
The problem for eBay Inc (NASDAQ:EBAY) is that its trademark Marketplace revenue is seeing slow growth. In the quarter, Marketplace revenue grew just 10%, which was down from Q1’s 13% growth. Marketplace is eBay’s largest segment, accounting for half of its revenue.
In the past, the company had shown a favorable trend where Marketplace revenue exceeded active user growth. However, in Q2, user growth was 14% compared to 10% growth in revenue, showing that fewer consumers are using eBay’s core buy and sell platform.
At 4.5 times sales, I don’t see how eBay Inc (NASDAQ:EBAY) is presenting too much upside. Fortunately, the company is not sitting on its weakness. eBay is testing same-day delivery and a local Marketplace. If successful, these services could re-attract consumers to eBay Inc (NASDAQ:EBAY). The problem with e-commerce or any online service is that many such sites become fads. If eBay Inc (NASDAQ:EBAY) lags its competition too much, the company runs the risk of losing sellers, buyers, and becoming less cool. As of right now, I don’t see too much to get excited about.
#2 Not as expensive as you think
Amazon.com, Inc. (NASDAQ:AMZN) traded lower by 4% and then recovered to close with gains of nearly 3% after it missed Q2 expectations. In the quarter, Amazon.com, Inc. (NASDAQ:AMZN) grew revenue by 22%, as sales in the U.S. increased 30% year-over-year.
Amazon.com, Inc. (NASDAQ:AMZN)’s margins are horrible, and were worse than usual in Q2 at 0.50%. However, investors expect it. The company is focused on growth, reinvesting money back into its business, and is doing a good job.
While e-commerce companies are retail focused, they are valued like technology stocks, as their operations run through the web. Amazon.com, Inc. (NASDAQ:AMZN) trades at 2 times sales, which, in technology, isn’t that bad.
The company is now entering the $587 billion a year grocery business and continues to see great success with its Kindle, Prime membership, and every other service that it offers. With $66 billion in revenue over the last 12 months, the entrance into grocery could add significant top-line growth, and is a development to monitor. Hence, I say Amazon.com, Inc. (NASDAQ:AMZN) is still a great growth opportunity, even over $300.