Motley Fool: eBay could cash in big by being mobile
Over the past five years, eBay’s (Nasdaq: EBAY) stock has plunged some 50 percent as it lost ground to its biggest competitor, Amazon.com. The current mobile boom may just be what the doctor ordered, though.
People are increasingly buying goods online. According to Bloomberg’s BusinessWeek, in 2010 the mobile commerce industry will equal $25.2 billion, and by 2015, $129 billion.
Consumers are using iPhone and Android software to buy everything from clothing to art to even cars. EBay has taken advantage of the situation, offering more than a dozen mobile apps that allow users to buy, sell and search for great deals. This can be a real growth driver for eBay, if it can keep offering new and improved apps and if it stays one step ahead of Amazon. Mobile is still a very small portion of eBay’s $9 billion in revenue, but the potential is enormous.
Though eBay’s marketplace revenue dropped in its second quarter, it has been consistently increasing sales from its pay services, which include PayPal and Bill Me Later. The second half of 2010 could be difficult, though, if the dollar strengthens and revenue abroad translates into fewer greenbacks.
With a P/E ratio around 11, eBay’s stock is promising. (Amazon.com and eBay are “Motley Fool Stock Advisor” selections, and “Motley Fool Options” has recommended a bull call spread position on eBay.)
Ask the Fool
Q: What are the world’s biggest brands? – J.L., Allentown, Pa.
A: The folks at Interbrand track and list the most valuable brands in the world each year. Here are the top 10 brands for the year 2009, along with what they estimate to be the market value of each, in billions of dollars: (1) Coca-Cola, $69; (2) IBM, $60; (3) Microsoft, $57; (4) General Electric, $48; (5) Nokia, $35; (6) McDonald’s, $32; (7) Google, $32; (8) Toyota, $31; (9) Intel, $31; (10) Disney, $28.
Keeping up with changes in brand rankings from year to year can offer clues about how aggressively various companies are growing. Google, for example, was ranked 24th in 2006, while Kodak fell from 70th in 2006 to out of the top 100 in 2009. Over the past year, Amazon.com jumped from 58th to 43rd, while Starbucks slipped from 85th to 90th and Harley-Davidson slowed from 50th to 73rd.
Q: As I invest in the stock market for the long haul, what kind of return should I expect? – T.S., Detroit
A: There’s no guaranteed return with stocks. But over many decades, the stock market has averaged roughly a 10 percent return annually. Over just a few decades, though, it can offer less.
Over the past 20 years, the S&P 500 has averaged 6 percent; over the past 30, it’s closer to 8 percent. (For the “real” return, subtract the rate of inflation, which has averaged 3 percent over the long run.)
Those returns reflect investments in the overall stock market, not in various individual stocks. Particular companies can end up trouncing or lagging the market. You can aim to beat the market’s average return by carefully selecting individual stocks or mutual funds.
My worst investment over the last 40-plus years has been Social Security. Around 1970, I decided I needed to start saving and investing, but how much? I decided to match the amount shown on my paycheck for Social Security tax (not including the company match). This money went into my retirement account. I continued this level of saving all of my working life. I am now retired and collecting Social Security. I am also drawing money from my retirement account. My Social Security check is for $1,695; my retirement account withdrawal (without touching the principal) is $5,000. Which was the better investment? You make the call! – S.S., St. Petersburg Beach, Fla.
The Fool responds: Don’t think of Social Security as an investment. It’s a transfer system designed to offer a level of financial security to retirees, via payments from those currently working. It’s a critical component of retirement for many, but it’s best supplemented by a pension or by a healthy nest egg like the one you grew. Your long-term diligence has paid off well. (Get more retirement strategies at www.fool.com/retirement.)