Amazon, eBay and Financial Momentum
Investors perceive Amazon as having much more growth potential than eBay. That, at least, is what appears from an analysis of the companies’ financial reports.
Both companies are publicly traded, and both are ecommerce pioneers. Jeff Bezos launched Amazon in 1994 as an online bookseller in a Seattle garage. He rigged-up a bell to ring every time an order came through. Yahoo! then mentioned Amazon as a “cool” site, book orders poured in, and the bell wouldn’t shut off. Amazon has since diversified its product line. Bezos is now 46 and Amazon has roughly 24,000 employees. It sells books, movies, games, electronics, computers, consumer goods and much more. Notably, its Kindle book reader is, according to Amazon, among the company’s most popular products.
Amazon’s financial picture is bright. The company’s market capitalization (the stock price times the number of shares outstanding) as of this writing is roughly $53 billion. Its revenue for the March 2010 quarter was roughly $27 billion, a 40 percent increase for the same period the previous year. The stock trades at $118 per share, which is 51 times its trailing earnings-per-share. This is a huge ratio that suggests investors believe the company will continue to grow. The company posted net income for the March quarter of roughly $1 billion and it held roughly $5 billion in cash on its balance sheet.
Pierre Omidyar founded eBay in 1995. He initially named it “AuctionWeb” but changed to eBay in 1997. He hired Meg Whitman as the company’s president, and 30th employee, in 1998 amid rapid growth. The company sold common shares to the public in 1998 and Omidyar, Whitman and a handful of other employees became instant millionaires. eBay subsequently purchased PayPal, StubHub, Skype, Shopping.com and other companies. Whitman has since resigned from eBay and is running for governor of California. Omidyar, now 43, remains chairman of the company, but has focused his efforts of late on digital journalism, having founded “Honolulu Civil Beat,” an online newspaper in Hawaii. eBay has approximately 16,000 employees.
eBay’s financial momentum has stalled. The company’s market capitalization is roughly $28 billion. Its revenue for the March 2010 quarter was $8.9 billion, a 9 percent year-over-year growth. The stock trades at $21 per share, which is just 11 times more than its trailing earnings-per-share. This is a relatively low ratio that suggests investors do not see stellar growth ahead for eBay. The company recorded net income for the March quarter of $2.4 billion and it held approximately $4.5 billion of cash on its balance sheet as of March 31.
comScore, the Internet tracking firm, recently estimated that Amazon had 77.9 million visitors in May 2010, a 23 percent increase in traffic over May 2009 and a traffic ranking of 12 of all U.S. websites. eBay, comScore estimates, had 77.5 million visitors in May, a 7 percent increase over May 2009 and a traffic ranking of 14 on comScore’s list.