eBay Is Undervalued Against Peers

NEW YORK ( TheStreet) -- After 17 years of marriage, my wife and I have a tendency to tell each other the same things more than once. The following conversation repeats itself often in my home after receiving a package.

My wife "Where did you get that?"

Me "I ordered it on eBay ( EBAY).

My wife "I don't think anyone buys stuff there anymore, why didn't you order it from Amazon ( AMZN)?"

My response is usually the same, "I checked both and eBay had the better price".

She is right about one thing; a lot of sales have shifted to Amazon from other Web sites. eBay isn't always the lowest cost on any given item so if you're looking for the best price it's worth a few extra mouse clicks to compare.

From a user's vantage point, eBay and Amazon appear almost parallel in their sales approach. You can order from many merchants offering tens of thousands of almost every product imaginable, and have one checkout to finish the transaction, even if ordering from several merchants at the same time.

eBay and Amazon aren't the only two that allow third parties to sell within their system. If you visit Sears.com ( SHLD) you may notice third party merchants offering products also. I think that's a brilliant move by Sears due to their already massive nationwide retail store footprint.

Amazon is already testing retail pickup lockers in various locations. So far, the results are mixed. Staples ( SPLS) and RadioShack ( RSH) decided to pull the plug on their stores for Amazon pickup lockers. I don't know what the terms of the deal were, but Amazon must not have given much if RadioShack pulled the plug considering they are on the ropes.

Not to be outdone, eBay is testing "Click & Collect" in the UK. eBay shoppers continue to buy products on eBay, and instead of shipping the product to their home, they pick it up at a selected retail location. The concept appears much the same as Amazon's.

There is one noticeable difference that investors should keep a keen eye on. The terms of the retail location agreements could impact the collection of sales tax. It's reasonable to believe that if Amazon places a locker location inside a state without an otherwise physical location, that may create the nexus needed to allow the location's state to demand sales tax.

For eBay it's not so clear because eBay itself isn't selling the products, third party and often mom and pop operations are. If eBay can locate lockers throughout the United States, it may turn into a competitive advantage over Amazon.

eBay trades at an estimated forward price-to-earnings ratio less than 18, while Amazon's requires an oxygen mask at more than 110, and Sears isn't expected to produce a profit within the next 12 months. Count on eBay to close the Amazon gap quickly.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Robert Weinstein is an active trader focusing on the psychological importance of risk mitigation, emotion and financial behavior of market participants. Robert co-founded the investing blog StockSaints, where he writes a journal about his trading activity and experiences.

In addition to TheStreet, Robert also contributes to Real Money Pro, providing real-time trading ideas for stocks, options and futures.