eBay (EBAY) stock dips to a 4-year low on weak prospects

eBay Inc. (NASDAQ: EBAY) stock plunged to a 4-year low of $26.02 on Monday as concerns are mounting about the company’s future in the midst of the competition war, weakening merchandise volumes and margin pressures. Investors remained double-minded about the e-commerce marketplace’s business model.

The company generates revenue primarily from the transactions it successfully enables and through marketing services, including classifieds and its growth initiatives of payments and advertising. The majority of revenue comes from a take rate on the gross merchandise volume of transactions closed on its Marketplace and StubHub platforms.

eBay faces increased competitive pressure online and offline. As the product offerings continue to broaden into new categories of items and new commerce formats, the company expects to face additional competition from other online, mobile and offline channels for those new offerings.

The company continues to face stiff competition from e-commerce giant Amazon (NASDAQ: AMZN) due to its market dominance and change in consumer habits. The habits of the shoppers have changed from looking into Google (NASDAQ: GOOGL) to Amazon as the first option of search and compare prices.

To compete effectively, eBay will need to continue to expend significant resources in technology and marketing. These efforts require substantial expenditures, which could reduce the company’s margins and have a material adverse effect on its business, financial position, operating results, and cash flows and reduce the market price of its common stock and outstanding debt securities.

For the fourth quarter, eBay reported a 27% dip in earnings due to an increase in costs and expenses despite a 2% decline in the top-line. The company experienced weakness in the Marketplace platforms as revenue was down in the segment, while StubHub and Classifieds platforms showed growth in revenue.

The future trend of eBay’s stock remained doubtful as the faltering volumes hurt the core business, which could downtrend in the near-term. The company has been struggling in moving its long-term multi-year plan as expected by the management for enhancing operating efficiency.

The stock ended Monday’s regular session down 4.50% at $26.34. The shares remained overvalued at current levels with a bearish pattern trend. The performance outlook is negative in the near-term and long-term. The stock, which has fallen over 31% in the past month, is below the 50-day moving average of $35.64 and the 200-day moving average of $36.46.