Headquartered in San Jose, California, eBay Inc. (EBAY) functions as a marketplace platform connecting buyers and sellers in the United States and internationally. The company's Marketplace platform includes its online marketplace at ebay.com and the eBay suite of mobile apps.
The stock has declined 38.2% year-to-date and 45% over the past nine months to close its last trading session at $41.08. The company cited that online shopping has slowed after the pandemic, and surging inflation and the Russia-Ukraine war have further affected demand. Also, the tight labor market and the supply chain crisis have contributed to EBAY’s weak performance.
The company posted an adjusted EPS of $1.05, beating Wall Street's estimate by 1.9%. However, the EPS declined 2% from the prior-year quarter. Moreover, along with its first-quarter results, EBAY announced guidance for the full year. The company expanded massively during the last two years amid the COVID-19 pandemic, but its growth has slowed in 2022 due to people returning to brick-and-mortar shopping. The expected revenue for the second quarter lies between $2.35 billion and $2.40 billion, compared to analysts’ estimate of $2.54 billion.
Here is what could shape EBAY’s performance in the near term:
Latest Developments
Last month, EBAY announced the launch of a series of exclusive NFTs through a strategic partnership with OneOf, a premier green NFT platform for communities across music, sports, and lifestyle. With this partnership, EBAY combines its global reach, unmatched inventory, and OneOf's eco-conscious Web3 technology to continue bringing a smooth experience that permits enthusiasts to buy and sell high passion and high-value items confidently.
Also, last month, EBAY and FedEx, a leading express transportation company, announced that Canadian sellers would be able to access FedEx shipping services directly through EBAY Labels, a proprietary label printing solution. The unification of FedEx technology provides EBAY sellers a seamless, on-platform experience accessing FedEx domestic and international shipping tools and services at preferential rates.
Mixed Profitability
EBAY’s 73.38% trailing-12-month gross profit margin is 101% higher than the 36.51% industry average. However, its trailing-12-month asset turnover ratio is 52.5% lower than its industry average of 1.03%.
Premium Valuation
In terms of forward EV/Sales, the stock is currently trading at 2.85x, which is 173.4% higher than the 1.04x industry average. Furthermore, EBAY’s 2.64x forward Price/Sales is 185.2% higher than the 0.83x industry average.
Mixed Growth Prospects
EBAY’s EPS is expected to increase 10.3% next year and 9.7% per annum over the next five years. However, analysts expect the company’s EPS to decrease 10.1% in the current quarter and 0.7% in the current year. In addition, the analysts expect the company’s revenue to decline 20.9 % in the current quarter, 6.9% in the next quarter, and 6.6% in the current year.
Unstable Financials
During the first quarter ended March 31, 2022, EBAY’s net revenue represents a 6% year-over-year decline. In addition, its income from operations declined 17.7% from its year-ago value to $692.00 million, while its Non-GAAP net income decreased 16% from its year-ago value to $625.00 million. Its Non-GAAP EPS decreased 2% from the prior-year quarter to $1.05.
Consensus Rating and Price Target Indicate Potential Upside
Of the 23 Wall Street analysts that rated EBAY, 10 rated it Buy, and 12 rated it Hold. The 12-month median price target of $57.19 indicates a 39.2% potential upside. The price targets range from a low of $42.00 to a high of $69.00.
POWR Ratings Reflect Uncertainty
EBAY has an overall C rating, equating to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. EBAY has a D grade for Sentiment, which is justified given its poor earnings estimates. It also has a C grade for Stability and Value. Its 1.15 beta is in sync with its Stability grade. In addition, the company’s high valuation is consistent with the Value grade.
Among the 66 stocks in the F-rated Internet industry, EBAY is ranked #13.
Beyond what I’ve stated above, you can view EBAY ratings for Growth, Quality, and Sentiment here.
Bottom Line
EBAY has declined 8.9% over the past month and 25% over the past three months. The stock is currently trading below its 50-day and 200-day moving averages of $49.23 and $61.75, respectively, indicating a downtrend. Moreover, EBAY’s higher valuation and bleak financials are concerning. Therefore, we think investors should wait before scooping up its shares.
How Does eBay Inc. (EBAY) Stack Up Against its Peers?
While EBAY has an overall C rating, one might want to consider its industry peer, Yelp Inc. (YELP), which has an overall A (Strong Buy) rating, and trivago N.V.(TRVG) and Travelzoo (TZOO), which have an overall B (Buy) rating.
EBAY shares were trading at $42.12 per share on Friday afternoon, up $1.04 (+2.53%). Year-to-date, EBAY has declined -36.11%, versus a -22.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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