Despite all the signals that keep pointing to its demise, eBay (EBAY), the one-time e-commerce wunderkind, continues to plod forward as if it was still a giant of the internet. Like last quarter's earnings release, eBay's Q2 post showed a company that is continually unable to meet analysts' targets as the company fails to accelerate the process of bringing new buyers to its platform.
Rightly so, eBay has been one of the worst-performing of the large-cap internet stocks all year, despite general enthusiasm for the e-commerce space. Companies like Etsy (ETSY) and Stitch Fix (SFIX) that were earlier pegged as losers, for example, have shot up meaningfully in the first half of 2018, as has perpetual giant Amazon.com (AMZN). eBay, however, seems incapable of reversing its slow decline. Year to date, the stock is down nearly 10%:
Yet, I believe the shares have further to fall. Activity on eBay seems to simply be running cold. Call it the hangover effects of eBay's fee hikes in the past several years - as sellers walked out on eBay in protestation of higher seller fees and took their variety of wares with them, buyers also saw less and less reason to buy on eBay. One of the things shoppers like most about Amazon is that it's the "everything store," where you can type in even the most obscure of items and find at least one seller that carries it. On eBay, with both the selection and volume of items getting thinner, it's getting harder and harder to bring buyers to the platform and, more importantly, reverse the steep deceleration in GMV growth.
I've always found the following chart in eBay's earnings presentations entertaining - largely due to the fact that eBay manipulates the scaling of the chart in an attempt to show massive user growth. In reality, buyer growth has been stagnant and essentially flat over the past two years. Since the start of 2017 (six quarters back) to 2Q18, eBay has grown active buyers by a measly 6%:
This quarter, active buyers grew just 4% y/y - but if we strip out the 3 million buyers associated with the Giosis acquisition, that metric becomes about one point worse.
In my view, eBay will likely stick around for quite a while longer, but it will continue to stagnate and disappoint both its customers as well as its investors. I've long been an eBay bear, and its most recent Q2 numbers validate the thesis that eBay has a very limited future.
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