Amazon Versus eBay

Amazon (AMZN) and eBay (EBAY) are two of the largest e-commerce's companies in the world. eBay not just the largest but its the most  dominant online auction sites in the world. Amazon is the one retailer in the world. Amazon and eBay have both made strategic acquisitions to grow there underlining businesses and gain more market share. Both companies have been in business since the 1990's and both survived the dot-com bubble burst unlike of e-commerce companies that fell when the bubble busted.

Amazon Inc. (AMZN)

Was founded in Seattle, Washington in 1994 by Jeff Bezos to sell books online. He believed that online commerce was the future and that their is a a large world wide demand for literature. The company online bookstore was a massive success, that had rapid growth and a massive competitive advantage to the brick and motors who can only offer about 200,000 title, while Amazon can offer an unlimited virtual warehouse of book titles. The company's initial business plan was unusual, it did not expect to make a profit for four years to five years. Amazon unconventional business model caused shareholders and investors didn't like the slow growth for Amazon to reach profitability. The company finally made a profit in the Fourth Quarter of 2001 of $5 million own revenues of $1 billion. Today Amazon sells a wide range of products on its site from books to fresh food. Amazon manufacturers and sells E-Rearder and Kindles to the general public. The company Kindle tablets holds at the end of 2013 a market share of 9.4%.

Subsidiares:

• A9.com - A company that is focus on researching and building innovated technology
• Lab126 - Developers of consumer electronics like the Kindle
• Endless Shoe - E-commerce site for shoes
• Brillance Audio - Largest independent audiobook producer in the United States

Amazon Valuation Ratios

Price to Earnings (P/E)	628.62
Earnings Per Share (EPS)	$0.60
Next Years (EPS)	$0.66
Sales Per Share	$162.11
Book Value Per Share	$21.22
Growth Rate	10.69%
Price to Book (P/B)	17.67
EV/EBITDA	46.82

Amazon revenues increased 22% to $74.45 billion and net income totaled $274 million vs a loss of $39 million in 2013. North America Revenues increased 28% to $44.52 billion and international segment increased 14% to $29 billion for 2013. Online sales increased 28% to $44.52 billion in 2013. Amazon sell at 628 times its earnings of $0.60 per share. This shows that Amazon is overvalued and sells at a earning multiple that is over 500 times that of the NASDAQ which sells at 21.42. If Amazon sold at the same multiple as the NASDAQ it would sell at only $13 per share or at the same multiple of eBay it would sell at only $16 per share. People are willing to buy Amazon at 628 times its earnings, means people believe that Amazon will grow into this valuation.

eBay Inc. (EBAY)

Was founded in 1995 by Pierre Omidyar and became a notable success story of the dot-com bubble. Is a auction site that allows users to list stuff they want to sell and auction it offer to bidders. The company grew from a side hobby of its founder to a multi-billion dollar business with operation in over 30 countries. It has expanded the business to include "Buy It Now" standard shopping, shopping by product bar codes, buying book through the international standard book number, online classified advertisements, online event ticket trading, online money transfers and other services. The company generates revenues from various fees and has a fee system that is quite complex. It has fees to list products, fees when the product sells, and several optional adornment fees all based on various factors and scale.

eBay Valuation Ratios

Price to Earnings (P/E)	26.03
Earning Per Share (EPS)	$2.21
Next Years (EPS)	$2.53
Sale Per Share	$12.39
Book Value Per Share	$18.27
Growth Rate	14.49%
Price to Book (P/B)	3.14
EV/EBITDA	15.31

eBay revenues increased 14% to $16.05 billion and net income increased 9% to $2.86 billion in 2013. The company revenues from its payment segment increased 19% to $6.63 billion and marketplace segment increased 12% to $8.28 billion. Revenues from the United States increased 14% to $7.71 billion and international segment increased 13% to $4.22 billion. eBay sells at 26 times its earnings, which is about 5 times more then the NASDQA. If it sold at the same multiple as the NASDQA it share price would be $46.

Compared Valuation Amazon and eBay

Amazon had revenues of $74 billion compared to eBay that had $16 billion. Amazon revenues are 5 times that of eBay and has two times more cash on hand then eBay. Amazon sells at 628 times its earnings while eBay sells for 26 times earnings. If Amazon sold at the same multiple as eBay its share price would be $16 and if eBay sold at the same multiple as Amazon its share price would be $1388. Amazon earned $0.60 per share compared to eBay that earned $2.21 per share, which shows that eBay is better at converting sales into profits which leads to earnings.

Compared Amazon and eBay Stock Selling at Different P/Es

P/E Ratios	Amazon Inc.	eBay Inc.
Current Selling Price Based on P/E	$375.04	$57.42
S&P 500	$11	$39
NASDQA	$13	$47
Tech Sector	$13	$47
Dows Industrial Average	$10	$35

Based on these compared valuations both company are overvalued specially Amazon. I think a better multiple to use is Price to Sales multiple.

Compared Amazon and eBay Stock Selling at Different P/S

P/S Ratios	Amazon Inc.	eBay Inc.
Current Selling Price Based on P/S	$374	$57
S&P 500	$258	$20
Tech Sector	$198	$15

Amazon has $162.11 in sales per share compared to eBay which has $12.39. eBay sells for 4.63 times its sales compared to Amazon which sell for 2.31 times its sales. Based on sales per share Amazon is a better buy but it show that Amazon is bad at converting $163.11 per share in sales into earnings. While eBay has ony $12.39 per share in sales does a better job at converting sales in to earnings. Both companies are overvalued an no one should pay up for future growth that may or may not ever happen.