In the past it was Macy's (M) vs. Gimbels. Now it's eBay (EBAY) vs. (AMZN). The two leading e-commerce companies both report third-quarter earnings this week. But there the similarities end. EBay announced on Oct. 21 that its net income fell 15%, to $502 million, or 38¢ per share, for the quarter ended Sept. 30. Amazon, which will report its numbers after the market closes on Oct. 22, is expected to show an earnings increase of 22%, to 33¢ per share.

Conventional wisdom throughout the year has held that Amazon shares are a safer bet, but eBay's making some big changes in the way it competes with other online retailers and some believe its shares may just be the better stocking stuffer for holiday investors.

First, a reality check: There's little doubt that Amazon will rule the e-tail roost this Christmas. The Seattle-based giant is on a roll thanks to its hot Kindle digital book reader. At its new price of $259, the Kindle will likely to be this year's version of Apple's (AAPL) iPod or Garmin's (GRMN) navigation system—the default gift for Dad. Meanwhile, Amazon's core e-tail business continues to thrive, even compared with other online shopping sites.

PayPal Lifts eBay Sales In this year's second quarter, Amazon's sales increased 15%, compared with a 4% decline in online retail sales overall. On Oct. 22, Amazon is expected to report that its sales will top $5 billion for the third quarter, a nearly 19% increase from the same period the previous year.

EBay, by contrast, reported that its third-quarter sales climbed 6%, to $2.2 billion, but that was entirely due to its PayPal electronic payments business and its Skype communications arm, which is being sold. At eBay's Marketplaces unit, which includes the core eBay auction business as well as other e-commerce sites such as, sales slid 1%, to $1.4 billion.

Sandeep Aggarwal, an Internet analyst at the research firm Collins Stewart, thinks eBay still may be the better investment. He says the San Jose-based company has been working to make its business more competitive with both Craigslist, in the market for used items, and Amazon, for new merchandise. (EBay owns a 25% stake in Craigslist.)

EBay Shares Have Doubled EBay is now offering a wider assortment of new products, often with free shipping. It's luring merchants with lower listing fees and improving its search engine so customers can find what they are shopping for quickly. "EBay has a higher-end section, not just secondhand items and sometimes at prices lower than Amazon," Aggarwal says. "You can still buy something on an auction and if it doesn't work then buy it at a fixed price."

EBay shares have doubled, to 25, from December of last year but Amazon's stock has nearly tripled, to 95. As a result, eBay trades for 16 times the $1.50 per share that Aggarwal figures it will earn this year. Amazon, by contrast, sells for 57 times his $1.64 per-share estimate, which is just a little below the $1.69 per-share consensus on Wall Street. Aggarwal says that at that level Amazon is overpriced and eBay is a better buy.

Not everyone agrees with his thesis. Citigroup (C) analyst Mark Mahaney compared the merchandise at Amazon, eBay, Wal-Mart (WMT), and He found that Amazon was the only one that had all 60 of the hot items on his shopping list in stock.

EBay was close with 97% of them. Wal-Mart had 83% and 80%. was the price leader, with an average discount to the manufacturer's suggested retail price of 18%. That was largely due to a $50-off video game promotion. Amazon was close behind with a 17% discount. Wal-Mart and eBay both had average discounts of 15%.

Mahaney's conclusion: Amazon is still a buy, and eBay a hold.

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