This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

What Is Wrong With eBay?

NEW YORK (TheStreet) -- What can be wrong with eBay (EBAY - Get Report), a company whose stock has increased more than five-fold over the last five years?

Plenty, according to Carl Icahn. 

Icahn doesn't like how Skype was spun out and then drew a bigger bid from Microsoft (MSFT). He doesn't like that the eBay board refuses to spin off PayPal, eBay's payments service. Icahn looks at a one-year gain for the stock of 7.2%, against a 60% gain for the Nasdaq as a whole, and goes "meh."

But perhaps Icahn should be more worried about eBay's slowing growth and relatively meager capital spending.

While Chinese Internet company Alibaba has used its base in e-commerce to build an estimated $100 billion in equity value over the last decade, eBay's growth has lagged. The company has missed the digital-goods opportunity and revenue growth has been slowing steadily since 2010.

Margins are healthy, with almost 18% of revenue showing up as net income in 2013, but that may be the biggest danger signal of all.

The fact is that e-commerce is growing rapidly, and it's a business that requires enormous capital investment. For eBay, capital spending was a relatively small $1.25 billion in 2013 and $1.26 billion in 2012. Overall revenue was $16.1 billion last year and $14 billion in 2012. 

An eBay spokesman pointed out that its $1.25 billion in capital expenditures last year represented 8% of revenue, while Amazon's $3.44 billion represented just 5% of revenue.

The company hasn't been a big player in Silicon Valley's acquisition spree, either.

Its biggest acquisition for 2013 was Braintree, a payment processor bought as a bolt-on to Paypal, for $800 million. The company also bought Decide, a price-forecasting company, and then shut it down. It bought Shutl, an English courier service, but that was also a relatively small deal.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
EBAY $23.81 0.00%
AAPL $93.24 0.00%
FB $117.81 0.00%
GOOG $701.43 0.00%
TSLA $211.53 0.00%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs