Is New Traffic Data Telling You to Buy Amazon & eBay?

ChannelAdvisor provides very telling data, and by using that information investors can learn quite a lot about the investment outlooks for Amazon and eBay.

Jul 19, 2014 at 9:00AM

According to ChannelAdvisor Corp (NYSE:ECOM), both eBay Inc (NASDAQ:EBAY) and Amazon.com Inc (NASDAQ:AMZN) saw particularly strong demand in the month of June, which thereby caused both stocks to trade higher last Friday. With Amazon and eBay weighed down and off of their 52-week highs, should investors take this data as a reason to buy and hold right now?

What has ChannelAdvisor told us?
ChannelAdvisor is a behind-the-scenes company with technology for improving e-commerce and other industries like advertising. The company serves retailers and vendors who sell on e-commerce platforms with various services, like strategically adjusting the prices of goods for its clients to make them more  competitive. Essentially, ChannelAdvisor collects data and makes recommendations or changes for its customers after considering the data it collects.

However, ChannelAdvisor also releases very reliable data that gives investors a good idea of how certain companies are performing by telling us how their clients are doing. Back in April and May,  ChannelAdvisor told us that its Amazon clients saw comparable sales rises of 27% and 28.1%, respectively. Clearly these are strong numbers and insinuate that Amazon is growing revenue at a 20% plus rate.

ChannelAdvisor also said that its eBay clients saw their same-store sales grow just 11.5% in the month of May.  While Marketplace's growth has been slowing for quite some time, this showed a rapid deceleration from its March and April growth of 17.8%  and 14%, respectively. It's worth mentioning that shares of eBay have seen a near continuous downtrend in recent months.

What happened in June?
With that said, we have the tale of good and bad for Amazon and eBay from ChannelAdvisor's client data. Yet, for the month of June, nothing but seemingly strong data appeared for both companies.

Specifically, the stocks of Amazon and eBay soared higher last Friday after ChannelAdvisor reported that their clients saw rises of 34.4% and 12.3%,  respectively, in same-store sales. While the latter far lags the former, it does put an end to a three-month trend of decelerating same-store sales growth. As for Amazon, this metric is a rapid acceleration from its already impressive growth rates.

Granted, ChannelAdvisor's data is unlikely to directly reflect year-over-year growth for either eBay or Amazon. Part of ChannelAdvisor's reason for providing this data is to show that its services benefit its clients through better-than-average growth, thus it's no surprise that shares of the company also soared higher last Friday following the good data.

Is it time to buy Amazon or eBay?
The most important question going forward is whether these metrics suggest that now is the time to buy either Amazon or eBay. For eBay, it didn't see a great enough boost over the last month to suggest that its deceleration in growth has ended. Given Amazon's rapid acceleration in growth, it may have just been a good month overall for the space, and if so, eBay's performance doesn't jump off the page as being overly bullish.

Amazon shows no glaring reasons for skepticism, and its strong performance could help explain the recent sales weakness shown by retailers during the initial week of earnings season. Earlier this month the Fed said that it expects growth to accelerate in the back half of the year, and that it's seeing improved economic performance right now. While some retailers have been weak, Amazon might be seeing the first signs of this accelerated performance, which in turn could push its stock much higher.

Foolish thoughts
With all things considered, ChannelAdvisor's data is a good illustration of how these companies are performing, and right now Amazon looks to be clicking on all cylinders.

Amazon is an enormous retailer with nearly $80 billion in revenue. Therefore, it seems absurd to believe that its growth rate can continue, or even accelerate as the company grows even larger. Yet, if ChannelAdvisor's data is correct then this is exactly what we have seen over the last four months, and with the stock being more than $60 off its all-time highs, it might be a good time for investors to buy and hold this outperformer.


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Brian Nichols 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. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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