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Amazon.com, Inc. (AMZN), eBay Inc (EBAY): The Online Retail Sector Must Be Present in Your Growth Portfolio

eBay Inc (NASDAQ:EBAY) is another major player in the business. The company trades with a P/E of 24.6, below the industry’s average. Further, its three-year average revenue growth is 17.3%, above the industry’s average of 7.5. Its revenue increased 14% to $3.74 billion for the three months ending on March 31. Its net income also rose 18% to $677 million, or $0.51 per share, from $570 million, or $0.44 per share.

The company’s outstanding quarter was due to a solid business strategy. The PayPal section continues to deliver strong increases in revenue, with an increase of 18% to $1.5 billion. I believe the company should continue to provide capital appreciation to shareholders via stock repurchase programs. The company’s cash from continuing operations increased 76% to $937 billion, and its free cash flow more than doubled to $638 million for the first quarter of 2013, up from $289 million last year. Investors should expect further stock repurchases in the interim, and perhaps the instatement of a dividend, since the company’s balance sheet does not carry significant debt.

eBay Inc (NASDAQ:EBAY) is adapting well to technological changes. Although most online retailers allow purchases using a smartphone, the company has driven double-digit growth in active mobile users. This is huge potential for profit in the coming days. Also, the PayPal payment system is becoming the standard choice for internet transactions, and revenue from the platform should continue to gain momentum in the coming years.

eBay Inc (NASDAQ:EBAY) is a great company, and the stock should be in your growth-oriented portfolio.

The foolish message

These online retailers offer great potential for capital growth. I do not believe that the Marketplace Fairness Act will have significant impacts on these companies, as the benefits from buying online still outweigh shopping in brick-and-mortar stores. Usually, customers will find a large variety of products to suit their needs, and it is not uncommon to see lower price tags. Overstock.com, Inc. (NASDAQ:OSTK) is a minor player, but it is quickly growing in the industry, and its low prices and deals should continue to bring more customers in the future. Amazon has diversified to other areas such as video streaming, which should increase its revenue significantly. Also, the retailer is a well-established e-commerce site with many loyal customers, thanks to excellent customer service. Finally, eBay Inc (NASDAQ:EBAY) is growing steadily. PayPal is quickly becoming the standard payment method online, and its revenue should continue to improve in the interim. For these reasons, long positions in these companies should be considered.


Robinson Roacho has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and eBay. The Motley Fool owns shares of Amazon.com and eBay.
Robinson is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article The Online Retail Sector Must Be Present in Your Growth Portfolio originally appeared on Fool.com is written by Robinson Roacho.

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