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Walgreen Company (WAG), eBay Inc (EBAY), Target Corporation (TGT): Is This Giant a Good Long-Term Bet?

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As eBay Inc (NASDAQ:EBAY) battled tough economic conditions in Europe, it missed its earnings’ estimates in the second-quarter. With Europe’s economy still growing at a sluggish pace, the question is: What’s in store for the company going forward?

Expanding “eBay Now”

eBay Inc (NASDAQ:EBAY) has recently announced that it’s expanding its “eBay Now” service to Brooklyn and Queens, New York. The company has also added the Bay Area peninsula, between San Jose and San Francisco. eBay plans on covering Dallas and Chicago as well, but that will be done later this summer. “eBay Now” is  the company’s premier service, which delivers products from retailers like Target Corporation (NYSE:TGT)Walgreen Company (NYSE:WAG) and Best Buy Co., Inc. (NYSE:BBY) in less than an hour. Expanding this service offers a compelling competitive advantage versus other web retailers.

Quarterly earnings and guidance

eBay Inc (NASDAQ:EBAY)In the second quarter, eBay Inc (NASDAQ:EBAY) earned $640 million, or $0.49 per share, versus $692 million, or $0.53 per share, last year. The company generated revenue of $3.9 billion, compared to last year’s revenue of $3.4 billion. eBay’s Marketplace sales rose 10% to $2 billion, while PayPal’s revenue jumped 20% to $1.6 billion. PayPal’s active registered users grew by 4.7 million in the quarter. In the case of eBay Enterprise (formerly known as GSI Commerce), sales grew 11% to $246 million. eBay benefited from a gain of $118 million from divested businesses last year; excluding that amount, its earnings per share were up $0.07 from the previous year, which makes the results a little less painful.

Next quarter, analysts expect eBay Inc (NASDAQ:EBAY) to earn $0.63 a share on revenue of $3.91 billion. For the full year, analysts’ estimates stand at $2.71 per share on $16.18 billion revenue.

Going forward

As PayPal’s mobile apps are becoming really popular; more people are buying products through their mobile devices, driving eBay Inc (NASDAQ:EBAY)’s sales up. With “eBay Now” expanding in the U.S, Marketplace sales are bound to go up further. Since eBay’s long-term goal is to grow its “eBay Now” across the globe, it’s all set to become a chief contributor to the company’s profits in the future.

In order to integrate its marketing services, eBay Enterprise has recently launched a new organization called eBay Enterprise Marketing Solutions (EEMS). The EEMS would be responsible for providing e-commerce marketing to its clients. Given the fact that eBay Enterprise is already growing at a rapid pace, this latest initiative would bring in more revenue for the company in the future.

Moreover, eBay Inc (NASDAQ:EBAY) has plans of expanding its cross-border online shopping across its six major markets – the U.S., United Kingdom, Germany, Australia, China and Brazil. Reaching this rather untapped market would further enhance eBay’s growth prospects.

Valuation

eBay Inc (NASDAQ:EBAY) is trading at a low forward price-to-earnings of 16.19 and has a PEG of 1.24, making it one of the cheapest buys in the industry. eBay’s high profit margin of 18% shows that it’s still generating a lot of money on its sales. A low price-to-book value of 3.09 reflects that it still has a lot of growth potential. According to the sell side, eBay has a target price of $63, depicting that it’s undervalued by almost 22%.

Competitors

eBay Inc (NASDAQ:EBAY)’s biggest competitor, Amazon.com, Inc. (NASDAQ:AMZN), reported a loss of $0.02 per share during its second-quarter, 2013. As the company kept on investing on its International markets and domestic expansion, profits took a shot. However, it was able to grow revenue by 22%.

Amazon.com, Inc. (NASDAQ:AMZN) has more plans of making huge investments in its International segments. Hence, it is not expected to post substantial earnings in the next quarter. But Amazon’s rising revenue clearly shows that the company is growing its market share throughout the world. This is in line with the company’s long-term strategy of selling more digital content via its gadgets. Selling more digital content (like books, music, and videos) through its gadgets (such as Kindle) will eventually generate profits for the company in the long run. In short, Amazon’s future looks quite secure, making it a great buy. You can have a look at my detailed take on Amazon here.

On the other hand, American retailer Target Corporation (NYSE:TGT) has just announced its first “back to school season”in Canada. Back-to-school consists of a wide range of products including school supplies, furnishings and fashion items, making it a great place not only for students but for parents as well. Target opened 20 more stores in Canada during the month of July, and the company has plans of opening a total of 124 stores in the region this year.

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