eBay Hits a 52-Week High: Will Investors Keep Bidding Up Shares?

Shares of eBay (Nasdaq: EBAY  ) hit a 52-week high on Tuesday. Let's look at how it got here and whether clear skies are ahead.

How it got here
After hitting a 52-week high last month, eBay pushed to a fresh high on Tuesday as the company continued to see momentum sparked by recent bullish comments from an analyst.

Shares jumped 4.5% Monday to a six-year high as boutique investment bank and research firm Keefe, Bruyette & Woods, or KBW, initiated coverage on eBay with an "outperform" rating and $50 price target. KBW analyst Sanjay Sakhrani was particularly bullish on eBay's PayPal payments processing business, which has continued to march higher over the years as a percentage of total revenue and is the company's most promising growth catalyst.

Sakhrani said: "There is a consensus brewing that the next decade or so will see the proliferation of electronic commerce, largely aided by the increased prominence of the smartphone globally. We believe eBay is uniquely positioned to benefit from and capitalize on the convergence of commerce, payments and marketing."

eBay CEO John Donahoe recently said PayPal could soon become its largest division, overshadowing its namesake auction business. If that happens, eBay might want to consider a name change, just as Coinstar should, since Redbox is the majority of Coinstar's sales.

KBW sees a clear threat for traditional payment processing powerhouses Visa (NYSE: V  ) and MasterCard (NYSE: MA  ) , even as PayPal processes payments through their networks. PayPal also processes transactions using electronic debits that result in lower costs for merchants.

How it stacks up
Let's see how eBay stacks up with its e-commerce and payment processing peers.

EBAY Chart

EBAY data by YCharts

Let's also compare some fundamental metrics for a deeper read.

Company

P/E (TTM)

Sales Growth (MRQ)

Net Margin (TTM)

ROE (TTM)

eBay 16.7 28.7% 26.8% 19.2%
Amazon.com (Nasdaq: AMZN  ) 182.9 33.8% 0.9% 7.7%
MercadoLibre (Nasdaq: MELI  ) 37.2 36.3% 25.7% 39.1%
Visa 28.0 14.8% 42.7% 15.4%
MasterCard 26.7 17.1% 29.0% 35.1%

Source: Reuters. TTM = trailing 12 months. MRQ = most recent quarter.

Amazon is eBay's closest marketplace competitor, while it doesn't compete with MercadoLibre in Latin America. eBay's frenemy-ship with Visa and MasterCard in the more profitable payments processing business is likely to intensify in the coming years.

What's next?
Payments really are the belle of the ball. The segment grew 31.8% last quarter, far outpacing the marketplace's 11.3%. Watch out, Visa and MasterCard. PayPal is eyeing your pie.

Add all of these companies to your watchlist to get the latest news and analysis.

Fool contributor Evan Niu owns shares of Amazon.com, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of MercadoLibre, Amazon.com, and MasterCard. Motley Fool newsletter services have recommended buying shares of Amazon.com, Visa, MercadoLibre, and eBay. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On June 20, 2012, at 12:21 AM, Dfishmon58 wrote:

    I bought E-Bay several weeks ago only to sell it after a small gain. At the time I thought my money would be better invested elsewhere. The I received my issue of IBD and started reading more about PayPal potential and how KBW is also now following it labeling it a financial investment, for the lack of a better phrase as it applies to E-Bay. (Brain dead at the moment). Anyway, I decided that even though E-Bay doesn't pay a dividend my money was better in the long term invested in E-Bay then in the bank making a measly 1%. Now after reading your assessment I know I did the right thing, still leaving enough in the bank for an emergency fund.

    There are so many different stocks to purchase in this era of radical change. All of them could change the financial dynamics of our household over time. Patience has never been one of my attributes but I am learning to be more self-disciplined, which in my mind is the number one rule of long term investing. I believe at some point E-Bay will reward it's investors with a dividend or share by back at some point. But as i said there are so many to choose from that have such great potential and unless I was extremely wealthy I can't buy them all but I do have a fairly large basket of diversified equities held with my on-line broker. Does anyone know when too many are beyond one’s ability to properly manage? I believe I own 500-50 shares of over 50 stocks. Is this too many, for a small Individual investor with a less than a moderately self-taught skill set? ? Some I have lost money on but only one paper. So I am waiting for them to come back Arris is an example of one that has just broken even for me and I believe may be poised for a takeover/buyout. I could sell it for a small long term gain taking a profit and reinvesting it in one of my existing holdings increasing their shares while reducing the amount of equities that I must pay close attention to. Anyone have thoughts on this enviable problem or further thoughts on E-Bays future prospects.

    Thanks

    DfishmonP.S.

    Does this comment section have a spell check? Just wondered. I am currently typing on word and than cutting and pasting into the comment box. Just wondering as this is my first post in a very long time..

  • Report this Comment On June 22, 2012, at 1:59 PM, George513 wrote:

    As far as ebay and making/saving $ goes, forget the stock and use the site.

    Use a site like Ebuyersedge.com to set up saved searches. You get an e-mail whenever a matching item is newly listed. Especially good for "Buy It Now"s that are priced right.

    Try a misspelling search using a site like Typojoe.com to hopefully find some great deals with items that have main key words misspelled in the title. Other interested buyers might not ever see them.

    If you see an auction that you want to bid on, use a sniping service such as Bidball.com to place your bid for you. It'll bid in the last few seconds, helping you to save money and avoid shill bidding.

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