Internet retailer Amazon.com, Incorporated (NASDAQ: AMZN) and internet auctioneer Ebay, Incorporated (NASDAQ: EBAY) both meet and diverge as competitors in internet commerce space, and their futures may be divergent as well. Ebay, the leading internet auctioneer, faces flattening revenue growth, uncertain domestic prospects, and widespread customer dissatisfaction, whereas Amazon, the premier internet retailer, faces less uncertain revenue growth, has an expanding repertoire of successful e-tailing (internet retailing) strategies, and has not faced the dissatisfaction nor level of complaints which Ebay has.
While Ebay reported fourth quarter earnings last week of 45 cents per share on an adjusted basis, up nearly 50 percent, they forecast first quarter earnings of between 37-39 cents a share, which is less than analysts had expected. The company predicted revenue for the coming year of $8.5 to $8.75 billion, with adjusted earnings expected of $1.63 to $1.67 per share, compared to $1.53 per share for the year ending 2007.
The revenue growth may be slowing, and with the recent changes, including a new CEO and the controversial new fee structures along with ongoing problems of fraud and security issues with goods and auctions, Ebay also faces increasing competition in auctions from Amazon. Its stock has been trading in the high 20’s, well off its year high of more than $40 a share, and was downgraded by several analysts.
Amazon, on the other hand, despite some analyst’s questioning its continued high-growth prospects, showed a fourth-quarter profit of $207 million, on $567 billion in revenue. This was an increase in profit of more than 100%. The internet retailer also announced it bought Audible.com, an audiobook retailer which should fit in well with its online book-selling business. It also has branched out successfully into data storage with Amazon Web Services. Amazon continues to make inroads into EBay’s online auction turf, as it is perceived as being more customer-friendly, secure and with a fairer, more comprehensible fee structure by consumers.
The stock, which has traded in the 36.68-101.09 range in the last twelve months, has been in the mid-70s in recent trading. It reported 48 cents a share for the fourth quarter in 2007. The Company has forecasted a forty percent growth rate in earnings for next year, looking for a $1.55 per share at year’s end 2008 versus the full year $1.12 for 2007. Some analysts, including Piper Jaffrey’s Aaron Kestler, according to a CNN Money report, were concerned about Amazon’s gross margins, seeing growth slowing, and have forecasted a stock price of $68. Other analysts felt this ignores the robust revenue growth prospects, as Deutsche Bank has a $110 price target on the stock.
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