Rumor has it that in 2021 the investment world will witness the biggest stock battle in history. Two major e-commerce companies will competing to be crowned the undisputed king of the stock market. Get your trading account ready! You are betting for major profits.
eBay and Amazon, the companies that could very easily run the world, are competing in the stock market. Who will be the winner? In which company should you put your money this year? Let’s find out now.
eBay and Amazon were both established in the mid-1990s and transformed online shopping. eBay was the first online platform for person-to-person transactions, while Amazon evolved from an online bookstore to an online superstore.
Amazon went public at $18 per share in 1997, while eBay went public at the same price in 1998. If you had invested $1,000 in Amazon’s IPO, your investment would be worth $2.1 million today. If you had invested $1,000 in eBay instead, you would have earned about $352,000. I think that pretty much answered our questions. But let’s keep going.
While both companies beat the market over the past 20 years, Amazon generated bigger returns. We will find out why that happened and why Amazon is still a better overall e-commerce investment than eBay.
It’s all about the money.
Statistics show that in the first nine months of 2020, eBay’s revenue rose 15% year over year.
The management credited that robust growth to an increase in online orders throughout the pandemic. Analysts expect eBay’s revenue and earnings to rise 8% and 9%, respectively, by the end of 2021.
Amazon’s revenue and earnings rose by 20% and 14% in 2019. Compared to eBay, in the first nine months of 2020, its revenue rose 35% year over year as its earnings surged 68%. This year, analysts expect Amazon’s revenue and earnings to increase by 30% and 18%.
A customer-oriented business model
eBay connects sellers to buyers; however, it does not take on any inventories. Generally, sellers need to fulfill their orders. Only recently eBay launched a fulfillment service for high-volume sellers.
This business model faces two challenges. First, it’s difficult for eBay to clear out fraudulent sellers and fake products. Second, it faces intense competition from disruptive platforms.
Amazon, on the other hand, takes on inventories and fulfills orders with its own logistics network. Besides, it provides a simplified system for returns and refunds. It is also pulling sellers away from eBay with its third-party marketplace.
eBay’s stock is cheaper but…
For new investors, eBay could seem a better option since its stock is cheaper. Be careful – there is a catch.
eBay’s stock is cheaper for obvious reasons: It is shrinking as Amazon expands. It lacks a competitive advantage against challengers like Etsy and Shopify. Therefore, investors should pay a slight premium for Amazon compared to a discount for eBay’s slower-growth business.
So, did we answer all your questions? Just heads- up, you can invest and make a profit even when eBay stock is going down.