Student: Peter M. Burke
Instructor: Dr. Muhammad Sumadi
ACC557: Financial Accounting
December 16, 2012
Amazon or eBay, Which is the Better Investment? Both Amazon and eBay have carved out significant niches in the online retailing world but they have done it in strikingly different ways. Despite these differences, they are similar in many ways including the legal, political and struggles they face. Topics to be covered in the following report include a profile of each company, historical stock performance, as well as the performance of the initial public offering. Also discussed will be current issues that the companies are facing, an overall financial analysis of each company, and the accuracy/reliability of the data. Finally, a recommendation of which company is in a more solid position financially and is best built for future performance (Yahoo Finance, 2012).
Company Profiles Amazon and eBay are both in the online-only retail sector, but they approach the sector through very different business models. Amazon sells many of the same goods that one can buy from local “brick and mortar” retailers such as Kroger and Wal-Mart. Amazon does a lot of its own order fulfillment, but farms out a lot of that to vendors and even some personal sellers who offer their goods through Amazon, with Amazon getting a small cut since they are providing the website (Yahoo Finance, 2012). eBay is different in that while they allow sales from established external retailers, they do not sell anything directly to consumers. Everyone that lists items on eBay is simply using the eBay site as a sort of online classifieds. In other words, Amazon sells their wares personally through their own means, via “stores” of companies like Microsoft and from personal sellers. eBay only does the latter two of those three. As for their histories, both companies were created in the mid-1990’s. Amazon is based in Seattle and eBay is based in San Jose, CA (Yahoo Finance, 2012). eBay has nearly 28,000 employees while Amazon has nearly 60,000. Amazon’s competitors are eBay, Barnes and Nobles (since Amazon began as a bookseller), Apple (due mostly to the Kindle Fire versus iPad competition) and other mail order and catalog ventures. Firms like Wal-Mart, Target and Best Buy are also competitors (Yahoo Finance, 2012). As for eBay, their direct competitors are a bit different since their service methodology is also different. eBay’s competitors are Amazon, Google, Overstock.com and other mail order/catalog retailer players. eBay’s latest annual revenue ($13.5 billion) is far lower than Amazon ($57.26 billion). Also, Amazon is growing much faster than eBay, so the gap is growing. As of the last measurement, eBay was growing at 15% while Amazon was growing much faster at 27%. While the companies both share very common threads in what they sell and do, they are very different companies.
Stock Compare The stock prices for eBay and Amazon have both performed well over time, even though both took a hit during the 2007/2008 global recession. However, the paths they’ve taken independent of that are very different. As of the writing of this report, eBay’s stock price is at just over fifty dollars ($50.36/share) while Amazon is close to five times that ($249.19). As for where stock prices were at the time of IPO and the beginning of each of the last three calendar years, clear trends show themselves. Amazon’s IPO price was about $1.00/share, but its price has risen astronomically since then. As of January 1st, 2010, Amazon’s stock price was at about $120/share. As of January 1st, 2011, it was $175/share, and it was a bit higher than that as of January 1st, 2012, at about $195/share. Amazon’s stock price started low and languished a bit until the tech boom of 1999/2000 and then bottomed again and roughly stayed there until the post-recession times after 9/11.
Since the stock started rising in 2003,…