The e-commerce industry benefited significantly from the COVID-19 pandemic amid changing consumer trends toward online shopping. Moreover, this growth will likely continue in the post-pandemic environment, implying obvious benefits for e-commerce companies.

According to ReportLinker, the global e-commerce industry is projected to increase in size to $10.87 trillion by 2025, showing a CAGR of 29% during the forecasting period. 

With this in mind, today I’ll analyze and compare two e-commerce stocks, Amazon.com, Inc. (AMZN - Get Rating) and eBay Inc. (EBAY - Get Rating), to determine which is a better buy at the moment. 

Amazon.com is one of the biggest e-commerce brands that engage in the retail sale of consumer products and subscriptions in the US and worldwide. EBAY operates as an online marketplace platform that connects buyers and sellers. 

Year-to-Date (YTD),‌ ‌AMZN is down 4.78%,‌ ‌outperforming its rival‌ eBay,‌ ‌which‌ ‌has plunged about 18.6%‌ ‌over‌ ‌the‌ ‌same‌ ‌period.‌ ‌ 

Recent Developments 

On March 17th, Amazon announced that it had closed the acquisition of fabled movie maker MGM studio for $8.5 billion. Under the terms of the deal, MGM joined Prime Video and Amazon Studios, expanding Prime Video’s offering with over 4,000 film titles. Amazon expects that MGM content will increase the customer base of its streaming club Prime, leading to higher streaming revenues in the forthcoming quarters. 

On March 15th, Lee Horowitz, an analyst from Deutsche Bank, started coverage of eBay with a “Buy” rating. The analyst noted the growth in the company’s luxury resale business in Europe as well as eBay’s entry into the auto parts and accessories markets. Lee Horowitz believes the growth in 2H22 will enable the company to outperform consensus estimates. The firm assigned a $64 price target for eBay. 

Financial Overview & Analysts’ Estimates 

On February 3rd, Amazon released earnings for the fourth quarter of 2021. In Q4, the company’s net sales increased 9.4% year-over-year to $137.4 billion. However, the company missed analysts’ top line estimates by $230 million. Its Non-GAAP EPS came in at $27.75, significantly above the analysts’ estimates of $3.54. That’s because the company’s fourth-quarter net income of $14.3 billion contained a pre-tax valuation gain of $11.8 billion included in non-operating income from AMZN’s stock investment in Rivian Automotive, Inc. 

It is important to note that AMZN’s subscription service revenue dropped to $8.12 billion, compared to $8.15 billion in 3Q21. Also, Amazon announced a Prime membership price increase in the U.S. from $12.99 to $14.99 per month.

The company’s EPS is expected to decrease 44.52% year-over-year to $8.76 in its first quarter of 2022. However, analysts expect AMZN’s revenue to rise 7.24% year-over-year to $116.38 billion in the current quarter.

In the fourth quarter, ended December 31st, 2021, eBay’s revenue increased 5.2% on a year-over-year basis to $2.61 billion, beating analysts’ estimates by $6.31 million. The revenue growth was driven mainly by a 6.1% YoY increase in net transaction revenue to $2.45 billion, partially offset by a 4.12% YoY decrease in marketing services and other revenues to $163 million.

Its gross merchandise volume came in at $20.7 billion, representing a decrease of 10% on an as-reported basis and an 11% decrease on an FX-Neutral basis. The company’s Non-GAAP net income from continuing operations stood at $647 million, up 10% from its year-ago value of $591 million. As a result, eBay reported a Non-GAAP EPS of $1.05, topping Wall Street estimates by $0.06.

Currently, Wall Street expects EBAY’s EPS to decrease 5.15% YoY in the first quarter to $1.03. Following the same trend, analysts expect its first-quarter revenue to drop 18.57% YoY to $2.46 billion. 

Comparative Valuation

In terms of Forward P/E, AMZN is currently trading at 67.53x, which is significantly higher than EBAY, whose multiple presently comes in at 12.99x. When it comes to the Forward EV/EBITDA multiple, AMZN’s EV/EBITDA multiple of 20.47x is about 113.7% higher than EBAY’s 9.58x. 

Despite relatively a high valuation, AMZN is projected to demonstrate higher forward revenue and EBITDA growth rates of 17.97% and 23.24%, respectively. These growth numbers compare favorably with the respective EBAY figures of 1.95% and 1.27%.  

The Bottom Line 

While Amazon and eBay should benefit from the e-commerce industry’s growth in the long term, I believe AMZN stock is a better investment at the moment based on its strategic acquisitions, better financials, and better growth prospects.

AMZN shares were trading at $3,174.37 per share on Thursday morning, down $0.75 (-0.02%). Year-to-date, AMZN has declined -4.80%, versus a -5.81% rise in the benchmark S&P 500 index during the same period.

About the Author: Oleksandr Pylypenko

Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist. More...

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