With so many e-commerce stocks competing for your attention, you may have overlooked one of the trailblazers in this space, eBay (EBAY +1.50%). In this segment of Backstage Pass, recorded on Jan. 11, Fool contributor Demitri Kalogeropoulos and Fool analyst Asit Sharma take a look at the household name stock.
Demitri Kalogeropoulos: The company I'm bringing to highlight today is eBay. I'm sure everyone knows this. We were talking about e-commerce a bit. There's a lot of ways to get exposure to the e-commerce space. eBay is unique for a bunch of reasons, I have been following the company for a while.
Obviously, it's a marketplace that some people don't know that it's one of the top three e-commerce companies in the world basically because they handle so much volume.
They facilitated about $20 billion worth of merchandise sales in the past quarter. That, for example, compared to Amazon (AMZN 0.87%), which is the leader basically, Amazon is more in that $58 billion space, almost three times as much but still, these are huge numbers. eBay is a global company.
But it's a marketplace, so they're not selling their own products, they're just connecting buyers to sellers, so the actual eBay's revenue is in that more like $2.5 billion range.
That's one of the things that's interesting about this stock because it's got that asset-light model, a whole different approach. It doesn't have to spend all that cash on the fulfillment centers and the big inventory. It can just focus on basically doing that connection and gets paid to similar. We've talked about Etsy (ETSY 0.08%) before.
It's that similar model where they charge sellers a fee somewhere around that. eBay is in around that 10% range. Etsy's is way higher. That does wonders if you like finances in a company and you prefer that over really high-growth.
eBay's operating margin is somewhere around 25% of sales and you can compare that to about 6% for Amazon and Walmart (WMT +0.99%). Similarly, huge e-commerce giants.
It's also a cash-generating machine because of that model and they pour most of that cash right back to the shareholders. They spent $2 billion just last quarter on buybacks and they paid a dividend so we don't get a lot of that. That's still pretty rare in the e-commerce industry.
Obviously, it's not growing as quickly because that's the trade-off when they don't operate their own inventory. Sales growing about 10% in this past quarter. But if you like a dominant brand with an asset-light operating model and you like direct cash returns, you might want to take a closer look at eBay.
Asit Sharma: Nice. That was really succinct, Demitri. A really good overview there. You've been a fan for a while as I remember of this company.
Kalogeropoulos: I've been following them there for a while. It's just like I said, some of those numbers are just head-turning. I think it's something like operating cash flow with something like 30% of sales routinely. It's just so much. Such a cash business. That's really what attracts me.
Sharma: Sometimes the best investments are right in front of us.
