Recessionary concerns, a few lackluster quarters, overpromised and underdelivered projections, and a tech crash have absolutely crushed payment processing giant PayPal Holdings, Inc. (NASDAQ: PYPL) this year. Shares are trading 67% lower than last year.

A drop like this is understandably concerning for investors, but there are several reasons it could also be a tremendous buying opportunity. Here's a closer look at why investing at today's rock-bottom prices is a genius move right now.

Making the right moves

The second quarter of 2022 was PayPal's first non-profitable quarter since its spinoff from eBay Inc.(NASDAQ: EBAY) in 2015. Its earnings per share (EPS) fell to a loss of $0.29 per share from a gain of $1.01 last year, and its operating margin dropped by around 7%.

This loss wasn't because the company did less business -- in fact, revenue was 9% higher than last year. It was related to higher costs of borrowing and increased operational costs, as well as one-time charges from new products in PayPal's investment portfolio.

On the positive side, free cash flow was up 22% year over year. Payment transactions rose 16%, boosting total payment volume (TPV) by 9%. And PayPal is directly addressing the increased cost of borrowing and operating with targeted cost-saving measures. The company plans a $900 million cost-saving initiative that should help improve its bottom line.

The fintech company also has $15.6 billion in cash and cash equivalents, and only $13.6 billion in debt, including its latest round of issuance.

Recent upgrades mean prices are likely to rise

PayPal's focused moves to improve its operational costs have given analysts a fresh outlook on the stock, prompting those from Bank of America Corporation (NYSE:BAC) and Raymond James to upgrade their ratings on PayPal over the past few weeks. Share prices haven't jumped much in response, up just 1.5% from before the upgrades, but the analyst moves are a positive sign that investor confidence may also be returning. During that same time, the S&P 500 index was down 1.5%.

Cost savings alone are not going to be enough to rally PayPal's share price back to previous highs. That will take time. Short-term headwinds will likely impact the company if a recession unfolds, as many experts are predicting. But if we think long-term, its growth prospects still look promising.

PayPal was the first payment processing company in the world. Reinventing the services it offers its customers so it can adapt to new technologies and grow is nothing new. It has sufficient cash on hand to help it withstand a downturn, and today's pricing means that investors are in an excellent position to profit if the company does make strides toward recovery.

As a long-term, patient investor, I personally believe PayPal is a genius buy right now.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Investors have mixed feelings about eBay (NASDAQ: EBAY). The e-commerce website and platform thrived at the pandemic's onset when hundreds of millions wanted to avoid shopping in person. As a result, sales and customer signups surged. The economic reopening has had the opposite effect. After being cooped up at home for over a year, people want to get out of the house. 

However, it's not all bad news for eBay from now on. The company is implementing a strategy to boost revenue, even as customer spending is falling. Let's take a closer look at eBay's green and red flags below. 

Green flag: Increasing the take rate

Notably, eBay does not own any inventory for sale on its platform. Instead, it encourages buyers and sellers to meet on its website to make transactions. eBay makes money by taking a percentage of each sale (its "take rate").

Similarly, eBay leaves shipping and handling to buyers and sellers. That way, it doesn't need to own or operate fulfillment centers. It's an asset-light business model that works to deliver higher profit margins than if eBay were to participate in owning inventory or fulfillment centers.

Indeed, eBay's operating profit margin in the past decade has increased from 20.5% to 29.6%. Meanwhile, rival Amazon, which famously owns its fulfillment network, generated a measly operating profit margin during the same period.

EBAY Operating Margin (Annual) data by YCharts. 

The good news for eBay investors is that the company has been increasing its take rate in recent quarters. Between the fourth quarter of 2020 and the first quarter of 2022, eBay's take rate rose from 10% to 12.1%. Furthermore, considering that Etsy, a competitor with a similar business model, has sustained and increased its take rate in its previous five quarters at over 17%, suggests that eBay has room to expand its take rate further. 

eBay's rising transaction take rate has prevented revenue from falling as consumers return to shopping in person. The potential for more increases on this front is surely a green flag. 

Red flag: Declining customer spending

As mentioned earlier, people want to leave their homes and shop more in person. That means less money is available to spend at online stores like eBay. As a result, eBay's gross merchandise value (GMV), a metric that measures overall customer spending on its site, has declined for four consecutive quarters, starting with Q2 2021.

GMV fell from $24.1 billion in Q1 2021 to $19.4 billion in Q1 2022. The dramatic fall is not entirely due to economic reopening. The first quarter of 2021 held a major fiscal stimulus package, which boosted consumer spending in the U.S.

Still, the economic reopening is a significant headwind for eBay. Folks have more options on what to do with their time and money, and they're choosing to take dollars away from eBay and allocate them elsewhere. There's no telling how far or how long this transition will be, adding an element of risk to the situation.

This red flag can primarily explain why eBay's stock is off 47% from its highs. While the risk should not be ignored, it's no reason for shareholders to sell eBay stock. The majority of the bad news is arguably priced into the stock, while the potential to continue increasing the take rate could boost revenue, even as customer spending falls. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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On June 22, online marketplace eBay (NASDAQ: EBAY) acquired a specialty marketplace for non-fungible tokens (NFTs) called KnownOrigin. The press release said KnownOrigin was a "leading" NFT marketplace. As a cash-rich company, eBay is fully capable of funding this acquisition. 

However, with limited growth opportunities, the company needs to be careful to not lose focus on shareholder returns. And buying KnownOrigin is a step in the wrong direction for this reason, in my opinion.

Why eBay stock could be a fantastic investment

In my opinion, there are three main phases of a public company's lifecycle: needing capital, self-funding, and returning capital to shareholders. In phase one, unprofitable companies secure funding from banks and shareholders to build the business in hopes of achieving scale. In phase two, companies have achieved enough scale to be cash flow positive but they continue plowing all available resources into growing the business. By phase three, growth opportunities are limited and, therefore, cash flows should be used to reward shareholders.

These phases exist on a spectrum and the lines aren't set in stone. For example, a company can return some capital to shareholders and still invest in growth. But the takeaway point here is that investors need to know where a company is in its lifecycle to evaluate the opportunity. Stocks in each phase can be good investments if management uses cash wisely. 

For eBay, it's in phase three because growth opportunities are limited. Consider that in the fourth quarter of 2017, the company generated $2.7 billion in revenue. In the fourth quarter of 2021, it generated just $2.6 billion. In short, quarterly revenue was down almost 4% over this time period.

However, eBay's revenue per share was up a whopping 62% over this time period because management has repurchased billions of dollars worth of its own shares.

EBAY Revenue (Quarterly) data by YCharts.

Even though eBay isn't growing anymore, it's still a cash flow machine. As a marketplace, it doesn't carry inventory, which keeps costs low. It's merely connecting buyers and sellers and collecting a fee. This is why the company was able to have a free cash flow (FCF) margin of 25% in 2021 -- few businesses have higher margins.

Through stock repurchases, shares are taken out of circulation and remaining shares become more valuable -- thus rewarding eBay shareholders. The company also pays a fast-growing dividend -- up 58% over the past five years -- which contributes to overall returns. This is great use of cash by eBay's management. 

As of the first quarter of 2022, eBay has $4.7 billion left on its share repurchase authorization plan. Considering its current market capitalization is just $24 billion, this plan is significant. But the company has ample resources to pull it off. It has over $5 billion in cash and short-term investments on the balance sheet, generates over $500 million in quarterly FCF, and even has $5.3 billion in long-term investments in other e-commerce and financial-technology companies. 

What's so great about NFTs?

Hopefully you're salivating over eBay's potential to return capital to shareholders in coming years. It can be a path to market-beating returns. However, it assumes management doesn't get too distracted. 

By acquiring KnownOrigin, I fear it might be taking its eyes off the prize. Terms of the deal weren't disclosed, but I assume it paid a price that was well within its means. However, even if it's affordable, I doubt the NFT marketplace space is a path to growth. This is why I don't like the acquisition. Moreover, according to DappRadar, KnownOrigin only ranks 41st in NFT marketplaces by volume -- at least, in the past 30 days.

We don't have time to go down the NFT rabbit hole here. But suffice it to say that NFTs can be more than just collectibles. They can be used for record keeping, live-event ticketing, reservations, and more. But it doesn't appear that eBay is interested in this potentially innovative side of the NFT market.

Ebay is interested in NFT collectibles and has experimented in the space since May 2021. But according to data from NonFungible, NFT sales volume (in dollars) has plummeted 90% over the past year. And unique buyers have also decreased 42%. 

Management's desire to stay relevant is understandable. But unless eBay finds viable growth opportunities, it should focus on shareholder returns. Given current trends, NFT collectibles aren't going to be what management hoped. And so jumping into this cooling space could distract management from its best use of cash right now. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The S&P 500 Index (SP: .INX), plunged 3.56%, cancelling out Wednesday's euphoric gain.

The tech-heavy Nasdaq Composite (NASDAQ: .IXIC) was hit harder still. As most of Australia snored, it plummeted 4.99% in its worst session since June 2020. It's now at its lowest level since 2020.

The Dow Jones Industrial Average Index (DJX: .DJI) also suffered in Thursday's session overseas. It gave up more than 1,000 points, or 3.12%.

The US stock market's downturn could spell bad news for the S&P/ASX 200 Index (ASX: XJO) on Friday, particularly ASX 200 tech stocks, which often react to the Nasdaq's movements.

Here's what might have dinted the US stock market overnight.

US stock markets flop in Thursday's session

US stocks struggled overnight, with the nation's markets giving up Wednesday's notable gains.

The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average launched 2.9%, 3.2%, and 2.8% respectively on Wednesday, likely driven by positive sentiment out of the United States Federal Reserve.

The Federal Open Market Committee decided to increase interest rates by 0.5% to between 0.75% and 1% on Wednesday – its biggest increase in 22 years – in an effort to tackle inflation.

However, Federal Reserve chair Jerome Powell also commented that the entity wasn't "actively considering" hiking interest rates by another 0.75%.

Powell's confidence appeared to quell the market's nerves on Wednesday. However, concerns apparently reared their head once more in yesterday's (Aussie time) session.

Some US stock market favourites dragged on the NASDAQ-100 (NASDAQ: NDX) overnight.

The index slumped 5% driven by the likes of Airbnb Inc (NASDAQ: ABNB) and Tesla Inc (NASDAQ: TSLA). The stocks were among the Nasdaq-100's worst performers, both slumping 8%.

Meanwhile, the share price of eBay Inc (NASDAQ: EBAY) tumbled 11% on the back of the company's quarterly results.  

Booking Holdings Inc (NASDAQ: BKNG) was one of only a few Nasdaq-100 stocks closing in the green on Thursday. It gained 3% on news demand for travel surged during the March quarter.

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Shares in the online beverage supplier have been buoyant after the company released a market update earlier today.

Let's take a look at what Digital Wine announced.

Market update fuels Digital Wine share price

The Digital Wine share price received a boost after releasing an exciting market update.

The company says it has successfully completed the acquisition of Parton Wine Distribution.  

In addition, Digital Wine noted plans to expand its presence in Adelaide by opening an additional warehouse in Edinburgh Parks.

According to the update, the new facility is a purpose-built wine bottling warehouse in Adelaide with storage and distribution features.

Digital Wine also notched up a new record. For the month of July, its Wine Depot logistics division shipped 30,468 cases.  

In addition, the company noted that 24 new suppliers have joined Wine Depot since the last company update.

Digital Wine also provided investors with an update on its integration with eBay (NASDAQ: EBAY) and Amazon (NASDAQ: AMZN).

According to the update, the company expects its eBay and Amazon integrations to go live in August and September respectively.

The company's management also highlighted the latent demand despite COVID-19 induced lockdowns.

Digital Wine CEO Dean Taylor said:

Despite the uncertainty and disruption associated with ongoing lockdown restrictions in NSW and Victoria, we have managed to sign up more than 300 venues and generate pleasing levels of orders. The feedback from users on both sides of our marketplace has been extremely positive and demonstrated there's latent demand for a solution like the one we've created.

Snapshot of Digital Wine

Digital Wine is an online beverage supplier that provides end-to-end supply chain solutions for wine producers, distributors, importers and retailers.

The company's Wine Depot business operates as a cloud-based software-as-a-service, providing a marketplace platform.

At the time of writing, the Digital Wine share price is trading more than 1.39% higher for the day at around 7.3 cents.

Shares in the online beverage company soared more than 8% higher earlier, having hit an intra-day high of 7.8 cents.  

The post The Digital Wine (ASX:DW8) share price storms 8% higher appeared first on The Motley Fool Australia.

Investors ran for the exit back in April when the ecommerce company unveiled plans to sacrifice profit margins to deliver its 'aspirational' $1.25 billion revenue vision.

Such an increase in revenue would represent a doubling in Redbubble's current annual revenue.

However, since June the company has been crawling its way out of what appears to be a bottoming in the Redbubble share price, with one fund manager seeing the company as a significant opportunity.

Let's take a look…

Fund manager sees opportunity

EGP Capital is a Sydney-based fund manager that invests in Australian-listed companies with smaller market capitalisations. Typically, the fund holds 25 to 35 stocks, usually with the 5 largest holdings making up 50% of the portfolio.

Redbubble is hovering around the sixth largest position in the EGP Capital Concentrated Value Fund.

According to EGP's May report, the fund took advantage of the negative sentiment towards the Redbubble share price and added to their position.

Explaining the rationale behind the optimism to investors, EGP said in its report:

RBL is an incredible marketplace, the likes of which are seldom created and even more rarely available at the type of value investors pricing the market is currently ascribing to the business. ETSY has just acquired a business which appears to be meaningfully inferior to RBL for more than twice RBL's current market capitalisation. If the market does not soon wake up to the opportunity RBL currently presents, it may suffer a similar fate.

EGP appears to be referring to the peer-to-peer social shopping app, Depop.

Depop recorded $650 million in gross merchandise sales and $70 million in revenue in 2020, with a 10% take rate. Etsy Inc (NASDAQ: ETSY) is acquiring Depop for US$1.625 billion.

By comparison, in its Q3 FY21 update, Redbubble reported $577 million in gross transaction value year-to-date. Additionally, the company pulled $456 million in revenue.

Redbubble has a market capitalisation of $1.026 billion based on today's closing price.

The Redbubble share price is down 34% year-to-date but is up 65% over the past 12 months.

Other Redbubble share price news

The Redbubble share price looks unfazed by the recently announced inquiry launched by the Australian Competition and Consumer Commission (ACCC).

The inquiry will examine the practices of online marketplaces such as eBay Australia, Kogan.com Ltd (ASX: KGN), and others. It will particularly focus on the relationships with third-party sellers and consumers and how they affect competition.

Lastly, Redbubble will report its FY21 full year results on 19 August.

Investors will keep their eyes peeled for that one!

The post Redbubble (ASX:RBL) share price climbs 4% today appeared first on The Motley Fool Australia.

What happened

So what

Now what

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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ZoidPay, a cryptocurrency start-up with offices in Romania, Cyprus, and Hong Kong, has launched a nifty platform that lets consumers shop and pay in crypto at over 40 million major online retailers worldwide, including Amazon, eBay, and Alibaba. 

The "Shop Anything from Anywhere with Crypto," team is zeroing in on an untapped market, a full-crypto payment shoppers' platform that is usable in everyday life. ZoidPay relies on a practical ecosystem designed to benefit users in every way, ensuring a smooth, enjoyable shopping experience that works with most major retailers.

How ZoidPay Works

The platform features three main components to operate smoothly, a crypto payment card, digital wallet, and built-in marketplace (aka shoppers' paradise).

Its crypto card lets shoppers make contactless payments with their crypto assets, while the digital wallet lets people manage their crypto in a user-friendly environment. By the way, merchants can also use it as an mPOS (mobile point of sale) to accept crypto payments. Pretty neat.

The marketplace is a global merchants' aggregator that provides users with over $1 billion liquidity per day to spend crypto assets on major e-commerce platforms, such as Amazon. 

Very simply, this means you decide how much (or how little) of your crypto you want to liquidate so that you can actually buy stuff on the marketplace. 

The shopping experience itself is simple. First, users browse as a typical shopping experience, using the marketplace, even taking advantage of search filters. Then, you can add items to your cart, select your tokens from your wallet and get your virtual card issued to complete your payment.

Plans also include Google Chrome Extension integration, which allows users to buy anything from anywhere globally with their crypto simply by connecting their existing digital wallets. 

As a bonus, the ZoidPay digital wallet can also be used in physical stores simply by using your smartphone as a POS (point of sale.)

ZPAY Token is one to watch

ZPAY is ZoidPay's native token and the backbone of the ZoidPay Marketplace economy, offering several benefits to users. These range from zero transaction fees to exclusive staking rewards, discounts, and of course, access to the Marketplace itself.

According to the company's whitepaper, ZPAY has a total supply of 700 million coins, with a listing price of $0.16 per coin. Thus, this is a functional token with good value and potential.

The end of Fiat?

With an ever-increasing interest in crypto payments, the MasterCard New Payments Index shows that 93% of consumers are considering crypto for their online shopping ventures. 

It's start-ups like these that investors need to be keeping eyes on, this is the future of online shopping, and the market is only getting hotter.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Digital Wine says the partnership with Bibendum Wine Co. will introduce WINEDEPOT to thousands of trade buyers. The company also announced that it would roll out its own delivery fleet.

The Digital Wine share price hit an intraday high of 19 cents this morning, up 31%. At the time of writing, shares are 27.5% higher, trading at 18.5 cents.

Let's have a closer look at today's news.

Bibendum and WINEDEPOT

The partnership between the two beverage suppliers means WINEDEPOT will stock a large part of Bibendum's portfolio. 

Bibendum represents 160 local and international wine producers and craft spirits. It will invite its customers to join the WINEDEPOT platform, offering a $250 voucher as an incentive. The voucher will have minimum spend restrictions and will have to be used within a time frame.

The companies will also link their IT systems so WINEDEPOT customer accounts can be opened easily. The integration of IT will delay the partnership until late April. However, Digital Wine CEO Dean Taylor believes a faster uptake will offset any delay.

In return for its partnership with WINEDEPOT, Bibendum will have access to WINEDEPOT's logistics service, as well as a particularly large incentive: Should the partnership fulfil a number of achievements within 2 years, Bibendum will receive 20 million shares in Digital Wine.

These include Bibendum listing more than 280 products on WINEDEPOT and sending at least 4000 WINEDEPOT referral vouchers – of which at least 800 must be activated, thereby generating at least $800,000 in sales.

WINEDEPOT delivery fleet

Digital Wine also announced a partnership between WINEDEPOT and Direct Couriers.

The two companies will develop a dedicated WINEDEPOT delivery fleet for commercial customers. Deliveries will be dedicated to metro areas, allowing customers fast access to orders regardless of freight congestion.

Commentary from management

CEO Dean Taylor is excited about the potential the partnership with Bibendum has to fast-track WINEDEPOT's uptake.

Bibendum are without a doubt one of the most successful wholesale beverage businesses in Australia. You only need to look at the calibre of brands in their portfolio or speak with any major wine buyer to get a gauge on their position within the industry.

This partnership allows us to leverage Bibendum's unique product range, highly experienced sales force, long-term customer relationships and revered presence within the industry to drive rapid awareness of the benefits that our marketplace provides to trade buyers.

Bibendum founder and owner Robert Walters also welcomed the partnership.

I honestly believe that the wine and beverage trade has been crying out for an integrated trading, logistics and payment solution like WINEDEPOT market.

To play a key part in the launch of this revolutionary platform is exciting. It offers the potential of allowing us to service our client base at an even higher level, and this is one of the keys to our involvement.

Digital Wine Venture share price 

The Digital Wine share price has had a remarkable year so far, and today's news has brought only the latest boost.

On Friday, the company announced that WINEDEPOT had partnered with eBay Inc (NASDAQ: EBAY), which saw its share price soar 27% by the close of trade.

With today's gain included, the Digital Wine share price is up 375% year to date. It is also up a huge 1800% over the last 12 months.

The company boasts a market capitalisation of around $241 million, with approximately 1.6 billion shares outstanding.

The post Why the Digital Wine (ASX:DW8) share price has surged 31% today appeared first on The Motley Fool Australia.

eBay (NASDAQ: EBAY) stock has attracted few bidders in recent years. It traded in a range for years before Jamie Iannone took over as CEO in April. However, both a pandemic and a change in management have renewed interest in the consumer discretionary stock. This different approach could make eBay an overlooked comeback story in a fast-growth industry.

The eBay comeback

Despite the prosperity of e-commerce giants such as Amazon (NASDAQ:AMZN) or Shopify (NYSE:SHOP), eBay had become a laggard in a fast-growing retail segment. High fees, a difficult-to-use platform, and free listing options such as Facebook's (NASDAQ:FB) Marketplace made eBay an afterthought. It had fallen so far that its former subsidiary PayPal (NASDAQ: PYPL) now supports a market cap nearly eight times as large.

Conditions began to change when Iannone, a former eBay executive, returned to the company in April 2020. Prior to his return, Iannone helped spearhead e-commerce strategies at Walmart eCommerce and Sam's Club. These successes helped lead eBay's board to bring him back.

Iannone's strategy

Admittedly, as he started, store closings amid the COVID-19 pandemic increased interest in e-commerce across the board. However, Iannone embraced several different strategies to improve both the buyer and seller experience on eBay.

Under his leadership, eBay reduced the number of steps in the listing process to make adding products less cumbersome. It also introduced QR coding to make pick-ups more efficient and focused on "non-new in-season" products to better utilize the existing buyer and seller communities.

eBay also introduced tools and features that better enable small businesses to grow their enterprises. The company has simplified registrations and enabled storefronts on mobile devices. Additionally, eBay utilized AI teams to remove "points of friction." One addition involved improved filtering to help customers find the items they want. Finally, as agreements with PayPal expire, eBay has added managed payments in several countries to foster a digital wallet experience. Many of these migrations have already taken place.

Iannone announced on the Q4 2020 earnings call that promoted listings grew 86% over the course of the year. He also added that eBay acquired 11 million new buyers in 2020, and the frequency and retention of these customers resembled pre-pandemic levels. 

eBay's financials

Such improvements helped the top and bottom lines. In 2020, revenue increased by 19% to just under $10.3 billion. Also, GAAP net income from continuing operations rose to just over $2.5 billion, or $3.58 per share, up almost 68% from year-ago levels.

This increase occurred because operating expenses growing more slowly than revenue. Also, an investment in Adyen, a Dutch payments company in which eBay invests, brought in $709 million. This almost offset income taxes of $878 million. Additionally, these numbers do not include a one-time income boost of over $3.1 billion stemming from discontinued operations.

As for the future, the company believes the growth will continue in the near term. eBay projects revenue in the first quarter of 2021 will rise 35%-37%. It also expects between $0.81 and $0.86 per share in GAAP net income during this period, up from $0.64 the year before.

Given that optimism, it is little wonder eBay stock has increased by more than 60% since Iannone took over on April 27.

EBAY data by YCharts

Furthermore, even after that increase, investors who buy now will pay only about 18 times earnings from continuing operations for eBay stock. This appears cheap for a company reporting massive net income growth. Additionally, with global e-commerce expected to rise at a compound annual growth rate of just under 15% through 2027 according to Grand View Research, eBay's double-digit earnings increases could continue into the foreseeable future.

Should I buy eBay?

No doubt eBay has seen a significant turnaround in 2020. Iannone's strategy to make the platform more user-friendly for buyers and sellers alike may have added an additional revenue boost. Nonetheless, COVID-19 likely fueled a significant portion of that increase, so investors will probably have to see double-digit revenue and earnings growth continue after the pandemic to buy into an eBay comeback.

However, buying now means investors pay around 18 times earnings when both company and industry projections point to double-digit earnings increases. Should that value proposition remain in place after the pandemic ends, investors may continue bidding eBay higher.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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eBay (NASDAQ: EBAY) investors had a fantastic 2020, with the stock price comfortably outpacing the broader market during the pandemic-fuelled e-commerce boom. Sure, companies like Amazon and Shopify posted wider gains. But eBay's nearly 40% share-price spike reflected some major operating wins and kept it ahead of other huge online businesses, including Walmart.

Investors are about to learn exactly how well eBay did in 2020 when the company announces its holiday season results. The strength of that performance, along with management's official outlook for 2021, will determine whether the stock continues its winning streak into the new year.

Let's take a closer look at the company in advance of the fourth-quarter earnings report's release on Wednesday, Feb. 3, and what investors should watch for.

Merchandise volumes and conversion rates

eBay's core growth metric is the volume of merchandise moving through its platform. Soaring results here formed the basis for last year's stock surge. Volume had been flat or declining in the quarters before the pandemic struck but shot up to over 20% year over year as commerce stampeded to online channels beginning in late February.

This quarter's report will answer big questions around the sustainability of that spike. Volume gains year over year slowed to 21% in Q3 from 29% in the quarter that captured the most intense period of retailing shutdowns. For its part, management in late October forecast gains in the low double-digit percentages. However, eBay easily surpassed its last quarterly outlook, and investors are hoping for another beat this week.

Other indications of healthy market share would show in an expanding buyer pool and robust conversion rates for its product pages. CEO Jamie Iannone should comment on both these metrics on Wednesday.

Cash and profits

eBay's asset-light operating model restricts its growth potential a bit as compared to Amazon, but the trade-off is higher profitability and impressive cash flow. Earnings more than doubled last quarter as operating margin surged thanks to the combination of higher sales, lower expenses, and an uptick in seller transaction fees.

Wall Street is expecting more gains ahead in this area, with reported earnings set to rise to $0.83 per share compared to $0.66 per share a year ago. But the more useful figure to follow is cash flow. eBay generated $584 million of free cash flow in Q3, and the company needs more success here to meet management's goals of investing in the business while paying down debt and sending more cash to shareholders through dividends and stock repurchases.

The 2021 outlook

Iannone and his team will be looking at an unusually wide range of potential results as they craft their official 2021 forecast. Organic sales likely increased by at least 20% in 2020 compared to their initial prediction targeting a flat result. That boost sets a high bar for growth this year, but it also gives the marketplace giant momentum in a quickly growing industry.

The good news is eBay already showed off a few impressive competitive advantages at a time when sellers were looking for new platforms they could use to connect with their customers during COVID-19.

The company's main challenge for 2021 is convincing these small businesses to stick around, mainly by making the platform more popular with buyers and easier for sellers to use. These successes are the key to eBay protecting its positive momentum in what's likely to be a competitive selling period ahead for the e-commerce industry.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Earlier this year, Shopify Inc (NYSE: SHOP) surpassed eBay Inc (NASDAQ: EBAY) as the second-largest e-commerce platform in the U.S. by sales volume after Amazon.com Inc (NASDAQ: AMZN).

That was a humbling blow for eBay, the world's first online auction platform for person-to-person transactions. It also explains why Shopify stock has soared more than 3,700% over the past five years. During that same period, eBay stock rose 76% and Amazon stock advanced 375%.

Investors might be reluctant to buy Shopify stock right now, since it trades at over 290 times forward earnings. Meanwhile, eBay stock trades for 14 times forward earnings, which might make it look tempting as a value play. Nevertheless, it's smarter to pay a premium for Shopify than a deep discount for eBay, for three simple reasons.

1. Old e-commerce vs. new e-commerce

eBay's platform was once considered revolutionary. But today, it faces stiff competition from Amazon's third-party sellers, Etsy Inc (NASDAQ: ETSY), and other similar marketplaces. Social media platforms like Pinterest Inc (NYSE: PINS) and Facebook Inc's (NASDAQ: FB) Instagram are also integrating online purchases into their sponsored posts.

Today, Shopify's services are considered disruptive. Instead of providing a centralized marketplace, Shopify's e-commerce tools help over a million merchants set up online stores, process payments, manage marketing campaigns, fulfill orders, and access other services. 

In other words, Shopify operates behind the scenes to help companies establish their own online presence without relying on big marketplaces like Amazon and eBay. Shopify also launched Shop, a consumer-facing app that provides searchable listings for its merchants, earlier this year.

Shopify's decentralized approach enables merchants to expand online without diluting their identity, and it's easy to scale as a business grows. By contrast, merchants usually need to buy promoted listings to stand out in eBay's crowded marketplace.

2. Fortune favors the bold

eBay shrank its business over the past five years. It spun off PayPal Holdings Inc (NASDAQ: PYPL) in 2015, shut down its fixed-price subsidiary Half.com in 2017, sold its online tickets platform StubHub this February, and plans to sell its online classifieds platform by the first quarter of 2021.

eBay also reduced its marketing spending last year. The goal was to boost its profit and take rate -- the percentage of each sale it retains as revenue -- instead of maximizing gross merchandise volume (GMV). Its prioritization of profit over growth, along with its dividends and buybacks, strongly suggest that eBay is a mature tech company with limited growth prospects.

Shopify has expanded significantly since its IPO in 2015. It acquired the digital consulting and product development firm Boltmade in 2016, the drop-shipping platform Oberlo in 2017, and the warehouse automation company 6 River Systems last year.

The company has partnered with Amazon to let merchants sell products on Amazon from their Shopify stores. It has added similar integrations with Facebook, Alphabet Inc's (NASDAQ: GOOGL) (NASDAQ: GOOG) Google, Snap Inc's (NYSE: SNAP) Snapchat, and ByteDance's TikTok. It also beefed up its premium Shopify Plus tier for larger merchants.

Shopify has also expanded its own payments platform, Shopify Payments, which processed nearly half of its GMV last quarter. It launched its own fulfillment network last year. Finally, it offers additional services via its own app store for online stores.

All those aggressive moves indicate that Shopify is still expanding. It's eager to reinvest its cash into itself instead of divesting businesses and cutting costs to protect its bottom line.

3. Shopify is growing a lot faster

eBay's revenue rose just 1% last year as its GMV dipped 5%. It blamed that sluggish growth on the reduction of its marketing expenses and higher internet sales taxes in several U.S. states. Its adjusted net income rose just 5%, but big buybacks boosted its earnings per share 22%.

This year, eBay expects its revenue to rise 19%-20% after excluding its divested businesses and currency headwinds. Adjusted EPS is on track to grow 18%-20%.

Those growth rates look impressive, but they're mainly attributable to a temporary acceleration in online sales during the pandemic. Looking past that growth spurt, analysts expect eBay's revenue and earnings to grow 7% and 9%, respectively, next year.

Last year, Shopify's revenue rose 47% and its GMV surged 49%, but its adjusted EPS fell 30% as it integrated 6 River Systems into its new fulfillment network. However, analysts expect pandemic-related tailwinds to boost its revenue 81% this year, while adjusted EPS could jump more than tenfold.

Next year, analysts expect Shopify's revenue and earnings to rise 32% and 2%, respectively. Investors should expect Shopify to continue generating high double-digit sales growth, but its earnings growth could remain unpredictable due to the ongoing investments in its ecosystem.

Why Shopify is a better buy than eBay

The e-commerce market is rapidly evolving, and it arguably favors disruptive players like Shopify instead of legacy marketplaces like eBay. Shopify lets merchants build their own online brands and optionally link them to Amazon and social networks. eBay wants to trap them in a walled garden filled with low-priced competitors.

Investors seem to believe Shopify's vision for the future justifies its premium valuation, while eBay deserves a lower valuation. Shopify stock will likely remain volatile, but it should keep attracting more bulls than eBay.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Forget eBay, Shopify is a better e-commerce stock appeared first on The Motley Fool Australia.

eBay's (NASDAQ: EBAY) stock has enjoyed a strong rally so far this year. Investors were impressed with the online marketplace's surging growth trends during the initial phases of the coronavirus pandemic. They were just as excited about the prospect for improving profitability in late 2020 and beyond.

That optimism has set a high bar for eBay's upcoming earnings report, which is expected to show solid organic growth heading into the key holiday shopping season. Here are a few metrics to watch in the announcement set for Oct. 28.

Sales trends

The biggest questions surround the recent growth surge and to what extent it will hold up through the end of the year. eBay reported several encouraging numbers on this topic last quarter. Along with a basic spike in customer traffic as consumers shifted spending to online sources, the marketplace attracted many more sellers to its platform and had rising conversion rates along with sales growth across most of its categories.

Investors will be looking to see if eBay stretched those successes into July, August, and September, a period characterized by resumed retailing activities across most of the world. Wins here would show up in elevated sales volumes, which management predicted would grow by high-teen percentages in Q2. Also keep an eye on the buyer pool and whether it keeps rising at faster than a 2% clip.

Fees and cash

eBay entered the pandemic with far higher profit margins than its peer e-commerce giants, thanks to its asset-light approach to connecting buyers with sellers. That gap only widened in Q2, with operating margin jumping to 28.7% of sales versus 23% a year ago. The company is less exposed to the type of inventory write-offs that pinched profits at many physical retailers, and its marketplace also faces less risk around manufacturing and supply chains.

These factors all support robust returns, but transaction fees are the key metrics to watch when it comes to profitability. eBay kept the rate it charges buyers to roughly 9% last quarter as short-term promotions offset gains in other parts of the business. Even a tiny uptick in that metric would amplify earnings growth in the third quarter.

Looking out to the holidays

eBay lifted its 2020 outlook back in July, and investors have a good shot at seeing a similar boost on Wednesday assuming growth trends didn't disappoint. As it stands today, the company is predicting sales between $10.6 billion and $10.8 billion, equating to organic growth between 12% and 14%. For perspective, eBay was forecasting a roughly flat result on that metric before the pandemic struck.

It is smart to assume that growth will trend back down toward that pre-pandemic rate as the threat of the virus declines in the next year. But it's also clear that a large portion of the spending that consumers moved to online sources is here to stay. eBay's core challenge now is to convince its newest buyers and sellers to continue using the platform following a record growth year.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post eBay earnings: 3 things to watch appeared first on The Motley Fool Australia.

In a broad sense, the sector now comprises companies that not only create digital goods but also provide the physical backbone (cloud infrastructure) and security layers (cyber defense) that modern economies require to function.

About ASX technology shares

The tech space remains the primary engine for growth-oriented investors in Australia. While the "cheap money" era of 2020–2021 is a distant memory, the sector has found a new catalyst in the Generative AI build-out.

As of April 2026, the sector's long-term performance remains impressive, though recent volatility has tested investor resolve. Over the past five years, the technology sector has maintained its lead over the broader market, largely due to the compounding earnings of its largest members.

5-Year Performance Comparison

The following table reflects the annualized total returns (including dividends) over the last five years.

Note: The "All Tech" index experienced a significant correction in early 2026 due to geopolitical tensions and a re-evaluation of AI valuations. However, its 5-year average still comfortably outperforms the broader market's ~5% return.

New Trends and Risks in 2026

While traditional risks like rapid obsolescence still exist, the risks in 2026 have shifted toward Energy and Regulation:

• AI Infrastructure & Data Centers: Companies like NextDC (ASX: NXT) are now viewed as "digital utilities." The bottleneck for growth is no longer just software code, but access to the massive amounts of electricity required to power AI workloads.
• Cybersecurity & Data Governance: Following several high-profile breaches in recent years, cybersecurity is no longer an "optional" tech spend. It is now a mandatory defensive cost for every company on the ASX.
• Agentic AI: We have moved past simple chatbots. The "SaaS" (Software as a Service) model is being replaced by "Agentic AI," where software independently performs complex tasks. This has created a "dispersion" in the market—investors are picking winners that successfully integrate AI (like WiseTech) while punishing those seen as slow to adapt.

Tech can be volatile 

The S&P/ASX All Technology Index (XTX) remains the gold standard for tracking this sector. It is broader than the old IT index, covering 45 constituents across health-tech, fintech, and interactive media.

Many tech stocks in 2026 are still considered "high-conviction" plays. In a bull market with stable interest rates, these growth shares typically outpace the banks and miners of the ASX 200. However, as seen in the April 2026 market dip, tech is often the first sector to be sold off when global "black swan" events occur — such as the recent spike in oil prices and geopolitical rhetoric — due to their high price-to-earnings (P/E) multiples.

For investors, the lesson of 2026 is selectivity. The "tide" no longer lifts all boats; instead, the market is rewarding companies with high recurring revenue and "moats" that AI cannot easily disrupt.

Boom and bust cycles

In times of market panic, investors typically "flight to quality," moving capital into established, profitable large-cap shares. Because many ASX tech companies skew younger and prioritize aggressive reinvestment over immediate dividends, they remain highly susceptible to sharp sell-offs when sentiment shifts.

However, these "busts" often precede rapid recoveries. While the 2020 post-COVID rebound saw the All Technology Index surge 39% in six months, we saw a similar recovery in 2024–2025 as the market rewarded AI-integrated software leaders.

The innovation premium and risk

The tech sector is a cycle of rapid creation and creative destruction. Price bubbles can form quickly as investors chase the "next big thing" (such as the recent 2025 AI hardware craze), leading to sharp corrections when valuations outpace actual earnings.

Successful investing in this space requires acknowledging a fundamental truth: some tech investments will fail. Whether a company is supplanted by a superior algorithm or fails to monetize its R&D, obsolescence is a constant threat. A robust 2026 risk management strategy relies on diversification, balancing high-reward "moonshots" with mature tech stalwarts to survive the sector's inherent volatility.

Key areas for investment 

The ASX technology sector has expanded far beyond traditional hardware and software. Today's landscape is a mix of global heavyweights and specialized local innovators.

1. AI, Payments, and Emerging Tech

• Artificial Intelligence (AI): No longer just a buzzword, AI drives everything from predictive logistics to medical diagnostics. While US giants dominate, the ASX provides exposure through data-centric players like Appen (ASX: APX) and AI-integrated software leaders.
• Digital Payments & BNPL: Following the acquisition of Afterpay by Block Inc (ASX: SQ2), the sector has matured. Buy now, pay later (BNPL) players like Zip Co (ASX: ZIP) continue to innovate as "cashless" economies become the global standard.
• Blockchain & Digital Assets: Beyond cryptocurrency, blockchain's decentralized ledger technology is being integrated into supply chains and financial registries for its "incorruptible" record-keeping.
• Autonomous Systems: While Tesla and Waymo lead self-driving vehicles, ASX-listed companies contribute through specialized sensors and mapping software used in mining and industrial automation.

2. Infrastructure, Cloud, and Software

• SaaS (Software as a Service): The ASX excels here, led by Xero (ASX: XRO), which transformed accounting into a cloud-based subscription model.
• Cloud Computing & Connectivity: As data needs explode, "digital landlords" like NextDC (ASX: NXT) provide the physical data centers, while Megaport (ASX: MP1) offers the elastic interconnection services that make the cloud functional.

3. Internet, IoT, and Security

• Cybersecurity: With data breaches posing systemic risks, cybersecurity is now a non-discretionary expense. Investors often gain diversified exposure here through specialized ETFs like the BetaShares Global Cybersecurity ETF (ASX: HACK).
• Marketplace Leaders: The ASX is home to dominant digital platforms like REA Group (ASX: REA) and Carsales (ASX: CAR), which monetize high-traffic ecosystems through advertising and premium subscriptions.
• Internet of Things (IoT): From smart homes to "AgTech" soil sensors, the IoT connects billions of devices. Companies like Altium (ASX: ALU)—now a global leader in PCB design software—are essential to the manufacturing of these connected components.
• Streaming & Media: Homegrown services like Stan (owned by Nine Entertainment, ASX: NEC) compete with global giants like Netflix, leveraging proprietary digital infrastructure to deliver content.

A look at technology ETFs 

An ETF is a fund that invests in multiple shares but is sold like a single share on the ASX. 

Most ETFs track a specific index, so they provide a way to own an entire market sector without purchasing every stock individually. For example, you might buy an ETF comprising all 200 shares in the ASX 200 or a smaller ETF tracking biotech companies.

Like a mutual fund, an ETF has an expense ratio – the percentage of the fund's assets used to cover management, advertising, and administrative fees. In a broad sense, lower is better, but you should look at overall returns, not just the expense ratio, when considering an ETF.

There are several tech ETFs available on the ASX. We've already discussed HACK, but other examples include the Morningstar Global Technology ETF (ASX: TECH), which tracks a global basket of large-cap tech shares such as Netflix and Alphabet. 

The BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC) tracks every share in the ASX All Technology Index. The Robo Global Robotics and Automation ETF (ASX: ROBO) follows a basket of AI and robotics-focused companies. 

There are plenty of choices out there!

Who should invest in technology? 

Technology shares offer opportunities for novice and experienced investors alike. They are a highly diverse collection of companies operating in many different fields. And the sector includes many household brands that have become a part of our daily lives, like Afterpay, Apple and Netflix.

It's also an investment space where the average person can jump on an emerging technology they have experienced and believe will become part of the future.

Technology shares offer opportunities for both growth and income investors, who can choose from several mature, established companies. Of course, this is a rapidly developing sector, so there are usually some growth prospects, even in mature companies.

Trying to get a clear picture of the value of a technology share can be difficult. The products and revenue streams can be more complex than a consumer goods company like Woolworths Group Ltd (ASX: WOW), which sells brands and products most of us are familiar with. 

Valuing tech stocks can also be complex. We can value companies using several methods, including earnings-based, revenue-based, cash flow-based, equity-based, and member-based valuations.

Growth investors might like … 

Growth investing is the strategy of buying shares in companies expected to expand significantly in the future. Rather than valuing a stock based on what it has achieved to date, growth investors pay a "premium" today for the company's future potential. These stocks often command immense attention from market analysts, frequently overshadowing much larger, more established companies due to their disruptive nature.

The primary appeal is the prospect of astronomical returns from buying in early. Australian market history provides some spectacular case studies of this "high-conviction" approach:

• Afterpay (The "160-Bagger"): In one of the most famous growth stories on the ASX, Afterpay launched its IPO at just $1.00 in 2016. Despite a volatile journey, shares peaked at over $160.00 by early 2021. This culminated in a $39 billion acquisition by US giant Block Inc in 2022—the largest corporate deal in Australian history.
• Xero (The Long Runway): Listed since 2012, Xero operated in "aggressive growth mode" for seven years before reporting its first profit in 2019. During that decade, the share price climbed from roughly $4.50 to an all-time high near $158.00.

The fact that investors were willing to assign a P/E ratio above 500x to Xero during its expansion phase demonstrates a collective faith in its long-term "runway." However, because these companies often delay profitability to reinvest every cent into the business, traditional valuation metrics can be misleading.

To determine if a growth stock is reasonably priced, you should balance market potential against specific financial health markers:

• Forward Earnings & PEG Ratio: Look at forward earnings projections rather than trailing ones. The Price-to-Earnings-to-Growth (PEG) ratio is particularly useful as it adjusts the P/E ratio by the company's expected growth rate.
• Cash and Debt: For companies not yet reporting a net profit, pay close attention to Free Cash Flow and Debt levels. This helps you understand if the business has enough "fuel" to reach its goals without needing to diluting shareholders with constant capital raises.

Ultimately, growth investing requires a high risk tolerance and an eye for how a company might dominate its industry years down the line.

Top ASX technology shares

Tech stocks often straddle a couple of market sectors. Many ASX Information Technology sector companies combine technology with other services. For example, Xero is also a services company, and Zip Co is also a financial or payments company.  

Investors can gain exposure to various industries by investing in tech stocks. Maybe you don't think BNPL stocks have a bright future, but you believe demand for cybersecurity services will skyrocket in future. You can still gain that exposure by investing in technology stocks and ETFs. 

Three of the largest ASX technology stocks by market capitalisation are listed below. Note that 2 of the companies on this list are members of what used to be the ASX tech scene's hottest club – the WAAAXers. Along with Appen, Altium, Afterpay, and Xero, the WAAAX shares were described as Australia's answer to the US FAANG group, consisting of Facebook (now Meta Platforms), Apple, Amazon, Netflix, and Google (whose parent company is Alphabet).

WiseTech

WiseTech (ASX: WTC) is a global logistics software provider, with its CargoWise platform used by companies worldwide to manage complex supply chains, including customs and freight operations. Its software is deeply embedded in customer workflows, creating high switching costs and a steady stream of recurring revenue. This has helped the company build a strong competitive position while expanding rapidly through both organic growth and acquisitions.

Despite a significant pullback in its share price over the past year, driven by integration challenges, margin pressures, and broader concerns around AI disruption, the underlying business remains solid. Revenue continues to grow strongly, cash flow is improving, and CargoWise is still gaining traction globally. Much of the weakness in reported earnings reflects amortisation and acquisition-related costs rather than a deterioration in core operations.

Looking ahead, WiseTech appears well placed to benefit from the ongoing digitisation of global trade. The company is embedding AI into its platform to enhance efficiency and deepen customer integration, which could strengthen its competitive advantage over time. While risks remain, the long-term growth story is intact, and recent share price weakness may reflect sentiment rather than fundamentals.

Xero 

Xero (ASX: XRO) is a SaaS giant of the ASX that provides cloud-based accounting and payments software to small and medium-sized businesses. It was founded after Rod Drury recognised how difficult bookkeeping was for small businesses. Since listing in Auckland in 2007 and on the ASX in 2012, it has grown into a global platform with a strong presence across Australia, New Zealand, the UK, and beyond. Its software plays a critical role in managing invoicing, payroll, and financial reporting, making it deeply embedded in customer operations and supporting high retention rates and recurring subscription revenue.

Despite a sharp pullback in its share price in recent years, driven by the broader tech sell-off and concerns around AI disruption, Xero's long-term growth story remains intact. The company still has a significant global expansion opportunity and the ability to increase revenue per user through additional services. Encouragingly, analyst sentiment remains largely positive, with most ratings sitting at buy and price targets pointing to meaningful upside. Combined with its scalable model and ongoing shift towards cloud-based software, Xero continues to stand out as a compelling long-term growth play.

NextDC

NextDC (ASX: NXT) is an Australian data centre operator, providing the physical infrastructure required to store, process, and move vast amounts of data. Its facilities house computer hardware, telecommunications systems, and critical IT infrastructure that underpin modern digital services.

As demand for cloud computing, AI workloads, and data storage continues to accelerate, the importance of high-performance data centres has grown significantly. NextDC sits at the centre of this trend, with its infrastructure becoming increasingly essential to businesses. The company has been investing heavily in expanding capacity, and its growing forward order book highlights strong customer demand, supported by long-term contracts and recurring revenue streams.

While this growth comes with challenges such as high capital requirements and potential pressure on near-term earnings, NextDC remains well positioned within Australia's digital infrastructure boom. With operations across the country and international expansion plans underway, it offers exposure to the structural growth of data usage and AI, with some brokers remaining optimistic about its long-term potential.

The post Everything you need to know about investing in technology in 2026 appeared first on The Motley Fool Australia.

The drama continues at eBay (NASDAQ: EBAY). Late last month, the company's CEO, Devin Wenig, stepped down, apparently over a disagreement with the board of directors regarding the disposition of eBay's Classifieds business. The company turned the reigns over to CFO Scott Schenkel while the board searches for a permanent replacement. 

It's against this backdrop that eBay is scheduled to release the financial results of its just-completed third quarter after the market close on Wednesday, Oct. 23. Let's take a look at eBay's second-quarter results, review the events that likely led to the CEO's departure, and identify what investors should be looking for when the tech giant reports earnings.

More tepid growth

For the second quarter, eBay reported revenue of $2.7 billion, up just 2% year over year, or up 4% when eliminating the impact of foreign currency exchange rates. The company reported adjusted diluted earnings per share of $0.68, surpassing the high end of management's forecasted range, which topped out at $0.63. 

Active buyers on the platform increased by 4%, growing to 182 million worldwide. Gross merchandise volume on eBay's Marketplace climbed to $21.5 billion, generating $2.2 billion in revenue, up about 1% compared to the prior-year quarter. StubHub revenue grew to $264 million, up 7% year over year, while sales of classifieds increased to $271 million, up 5%.

Another one bites the dust

eBay announced on Sept. 25 that its CEO had stepped down. "Given a number of considerations, both Devin and the Board believe that a new CEO is best for the Company at this time." Wenig countered in a tweet, saying, "In the past few weeks it became clear that I was not on the same page as my new Board. Whenever that happens, it's best for everyone to turn that page over." 

The company also noted in its announcement that its previously announced operating review is ongoing, and that it expects to provide an update this fall.

Several news outlets have reported that the disagreement hinged on the board's decision to sell off eBay's Classifieds. Wenig's reference to the "new" board is referring to two new board members that have recently been installed at the urging of activist investors who been urging eBay to sell off some of its business units. 

Ongoing battle

It's worth looking back to see how this all started. Back in January, activist hedge fund Elliott Management became one of eBay's largest investors after announcing in an open letter that it had acquired a 4% stake in the e-commerce platform, at the time worth about $1.4 billion. This followed a 1% investment in eBay by Starboard Value, which was also agitating for change.

Elliott Management said in its communications that eBay was severely undervalued, and it urged the company's management to revitalize its marketplace and sell off some of its ancillary businesses, including ticket reseller StubHub and eBay's Classifieds.

In early March, eBay announced that it would undertake an internal review of the company's portfolio of assets, saying it was working with Elliott Management, Starboard Value, and "other significant shareholders" on these initiatives. The company eventually ceded two board seats to the activist investors and is considering the sale of the two business units.

What the quarter could hold

For the third quarter, eBay is guiding for revenue in a range of $2.61 billion and $2.66 billion, which would represent year-over-year growth of between 1% and 3%, excluding the impact of foreign currency exchange rate fluctuations. This would result in adjusted diluted earnings per share of between $0.62 and $0.65. 

Analysts' consensus estimates are squarely in line with eBay's forecast, calling for revenue of $2.64 billion and earnings per share of $0.64.  

The biggest item on shareholders' radars will be any announcement regarding the potential sale of StubHub or eBay Classifieds. The decision over whether to pursue these divestitures was obviously a contentious one, and it may have been the catalyst for the CEO's departure.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Wall Street's expectations are high for eBay (NASDAQ: EBAY) as it awaits the release of the tech industry veteran's earnings report on Wednesday. The company is still losing market share to fully-integrated rivals like Amazon and Walmart. However, its growth trends are stabilizing, which has contributed to this online marketplace's solid earnings growth.

Shareholders are also excited about the potential for increased profitability and surging cash returns as eBay shifts its business model and refocuses on its core marketplace segment.

With those big-picture trends in mind, let's take a look at the key metrics investors should be watching when eBay announces its third-quarter results.

Growth highlights

The consensus expectation among analysts is for flat sales of roughly $2.65 billion. Yet, because eBay does so much business in international markets, the more informative growth metrics will be changes in the buyer pool and gross merchandise volume, or GMV.

The company's pool of buyers has been growing at 4% for more than a year, compared to 5% in late 2017 -- look for that figure to stay steady this week. The e-commerce giant's strategy has been to focus on squeezing as much engagement as possible out of its current user base rather than spending heavily on marketing to acquire new buyers.

As for GMV, look for similarly sluggish results. eBay has seen approximately zero growth in this core metric for each of the last three quarters, mainly thanks to sinking volumes in the U.S. market. Executives suggested back in July that this segment will remain under pressure through the end of the year at best, in part because a rapidly growing number of states are enacting legislation that requires online marketplaces to collect sales tax. This effectively raises prices for eBay's customers, making its marketplace a bit less competitive.

On the bright side, eBay should reveal positive results in its two new growth lines: third-party advertising and payments processing. These segments aren't yet large enough to move the needle, but with the ad business scaling up toward $1 billion in annual sales, it might not be long before they become material growth contributors.

Capital plans

Back in July, management offered no updates on the results of their strategic review or their exploration of divesting the StubHub and eBay classifieds businesses. Investors will be hoping for news on those fronts Wednesday.

There are multiple directions that management could take, including spinoffs or the outright sale of the non-marketplace divisions. Cash raised from such divestments could go toward buying back stock or raising eBay's recently initiated dividend. Or management could decide to keep all its business lines together.

Since July, eBay announced the departure of its CEO Devin Wenig and the appointments of an interim leader and an interim CFO. With temporary figures in those top jobs, the company might be inclined to make less aggressive strategic changes for now.

Outlook

When eBay updates investors on its 2019 outlook, it will also make its first official comments about fiscal 2020. The 2019 prediction is for revenue between $10.75 and $10.83 billion, which would represent year over year growth of just 1% at the top of the range (but 2% to 3% growth on a currency-neutral basis).

Modest profitability increases will lift non-GAAP earnings per share to between $2.70 and $2.75. More importantly, their longer-term outlook will show whether executives foresee a quick rebound in 2020 toward the 6% growth that the company delivered in 2018, or if instead, they're anticipating a third straight year of slowing sales gains.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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However, they must be nimble to deal with one enormous risk heading their way.

Why I'm uber bearish on Seek Limited and Carsales.Com Ltd

This seemingly obvious risk may be nothing new to you, but it should at least prompt you to think about the future of both companies.

Remember, being critical of an investment thesis is something all good investors do often. But it is especially important for investments in companies that rely on innovation, like those from the tech industry.

In my opinion, the single biggest threat to SEEK and Carsales is social media. Anyone who uses Facebook (let's be honest, who doesn't?) should have noticed some of its recent product releases. The most pressing is the Facebook Marketplace, which was launched on October 3rd, 2016. Its Facebook's equivalent of eBay or Gumtree — but with one massive difference.

In 2012, Facebook accounted for 20% (that's ⅕ if you like fractions) of all website visits in the United States, according to Zephoria. That was 2012. In 2016, Facebook had 1.8 billion (with a 'b') active monthly users.

But that's not the only difference between Facebook and the likes of SEEK, Carsales, eBay, Gumtree and even Google's YouTube. One key difference is the communication channel. With 1.8 billion active monthly users, Facebook already has the largest network. What's more, Facebook users do not need to 'search' the Internet for new cars (and, potentially, new jobs) — they appear in the in-built marketplace or on their 'feed'. It's also free.

Of course, one feature Carsales has had over Gumtree is its reputation as the best marketplace for new and used cars. However, Facebook is arguably the most trusted website ever created. After all, how many other websites do 1.8 billion users put their date of birth, address, marital status and credit card information?

Foolish Takeaway

I don't think Facebook is an imminent threat to Carsales and SEEK's share price, but its status as the best social network ever created makes it the single biggest threat to ordinary listing sites just like these two.

For a scuttlebutt, I recently listed my car for sale on Facebook, Gumtree and Carsales. I found that Gumtree generated more impressions in the first week than Carsales but Facebook had the most immediate impact of all three — and this was before Marketplace rolled out in Australia. Weeks later however, Carsales continues to generate the most 'reliable' leads.

Nonetheless, in the next 10 years, I think it is very possible we will see Facebook as the leading company for all types of listings, including cars, real estate and employment. For that reason, I will not pay the current price to buy shares in Carsales and SEEK.

The post Why I'm UBER bearish on Seek Limited and Carsales.Com Ltd shares appeared first on The Motley Fool Australia.