Shares of eBay Inc. (NASDAQ: EBAY) are trading more than 43% lower than their 52-week highs. This is one of the lowest rates seen in the previous five years. The general issue is putting pressure on eBay prices, as visitors revert to established retailers. However, the trend toward more online buying should benefit eBay’s long-term prospects.
eBay’s business strategy enables it to remain profitable while also remaining more flexible in its decision-making. The platform does not have its own inventory for online sales or delivery services. Instead, the firm serves as a conduit between buyers and sellers.
As a consequence, eBay’s operating margin grew from 20.25% in 2012 to 28.05% in 2021. Because of acquisitions and sales, revenue and profitability were more variable during this period. However, eBay’s earnings per share have increased by an average of 23.6% per year over the last decade.
The reopening of the economy has slightly shifted shopper preferences, and many of them have begun to purchase online less frequently than even a year earlier. As a result, since peaking in the first quarter of 2021, eBay’s gross merchandise value has decreased for five straight quarters.
A portion of the sales loss is countered by an increase in the fees eBay collects from each transaction on the site. From 10.3% in the first quarter of 2021 to 12.4% in the second quarter of 2022, this percentage has climbed. For every $100 million in sales, a corporation earns an additional $2 million in commissions. For the fiscal quarter ending June 30, eBay generated $2.3 billion in commissions from gross goods sales.
Despite the fact that customers have returned to physical stores, the long-term trend of online purchasing has not changed. According to Statista, internet purchasing in the United States will increase to 22% in 2025 from 14% in 2020. As a result, while eBay has lost market capitalization in recent months, it remains one of the primary benefactors of the e-commerce business’s long-term success.