Is eBay in Trouble?

Investors weren't happy with eBay's latest business results. Shares fell 9% over the two days following its earnings report last week, wiping out almost all of the stock's gains for 2013.

EBAY Total Return Price Chart

EBAY Total Return Price data by YCharts.

Sure, eBay had a challenging quarter. Earnings fell by 8%, and revenue rose by just 14%. That sales growth figure was particularly troubling, as it was far below the 23% and 25% bounces that eBay logged over the same periods in 2012 and 2011, respectively.

And the company dialed back expectations for the rest of 2013. eBay now sees full-year earnings and revenue coming in at the low end of its guidance. Still, investors shouldn't overreact to one disappointing quarter. eBay's long-term trends remain strong.

Your friend in payments
Take PayPal, the payment service that's growing like a weed. It added 4.7 million users in the quarter, continuing its trend of booking growth at an increasing rate:


PayPal User Growth 

Q1 201


Q2 2012


Q3 2012


Q4 2012


Q1 2013


Q2 2013


Source: company financial filings.

PayPal now has more than 130 million active accounts and helped move $43 billion in commerce over the quarter. But as eBay pushes to bring the service offline, those figures should only grow. The company made progress on that front in the quarter, expanding its Discover merchant coverage in the U.S while bringing its international presence to six countries.

Bustling marketplace
eBay's marketplace also logged strong results, breaking $2 billion in sales and growing to more than 120 million users. Sure, that business is well behind , which had 209 million customers at last count. But eBay is expanding into Amazon's territory. Fixed-price sales, as opposed to auctions, grew faster than total sales again this quarter and now make up almost 70% of eBay's volume.

eBay has made no secret of its bid to attract online sellers away from Amazon. The 12% sales growth it notched in the quarter suggests that it made some progress there. But investors will find out more about this rivalry when Amazon reports its own results on Thursday.

As investors know, the retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only the most forward-looking and capable companies will survive, and they'll handsomely reward investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

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Fool contributor Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends and owns shares of and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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