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Why EBay Will Continue to Thrive: Analyst

It’s going to be difficult for any other company to have any success in the online marketplace model that eBay has developed, said Internet analyst Heath Terry at Friedman, Billings, Ramsey & Co. (See his stock ratings on eBay and Amazon.com, below.)

EBay posted a quarterly net profit and revenue that beat Wall Street expectations on Wednesday. The e-commerce trailblazer gave a third-quarter profit forecast in line with analysts' estimates.

“The core business started to follow up on some of the early signs turnaround that we saw last quarter,” Terry told CNBC. “Their Skype business growth accelerated and PayPal continued to take share.”

Terry said eBay didn’t invest in the technology aspect of their company, which caused them to lose customers to Amazon.com .

“[EBay] took the buyer base that they had for granted and basically let the sellers run the business to the benefit of their individual businesses, but not to the benefit of the buyers,” he said. “The company started to reinvest in that technology about 12 to 18 months ago...and you’re starting to see early signs of a turnaround.”

According to Terry, companies like Google have provided some competition by enabling smaller retailers to sell. But it's Amazon’s ability to expand out beyond its core line that allows it to compete with eBay.

“There’s a tremendous network affect from having more buyers and sellers, and that’s something that has kept a lot of competitors out of this,” he said.

Stock Ratings:

Terry has an ‘outperform’ rating on eBay and a ‘neutral’ rating on Amazon.com.

Disclosure:

Terry does not own shares from any of the companies mentioned above.

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