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Investment Overview for eBay (NASDAQ:EBAY)

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Below are key drivers of eBay's value that present opportunities for upside or downside to the current Trefis price estimate for eBay:

eBay Marketplaces

• eBay Transaction Revenues:  We currently forecast the transaction revenues to grow at a CAGR of 5% through the end of our forecast period, driven by increasing number of users and a gradually improving take rate (note: take rate is eBay's commission on items sold). There would be a 10% upside to our price estimate if the growth in revenues is around 7% instead.


• eBay EBITDA Margin:  We currently forecast eBay EBITDA margin to stabilize to around 37% by the end of our forecast period. However, there could be more than 10% upside to our price estimate if margins rise to around 43%. On the other hand, there could be a 10% downside to our price estimate if margins were to fall to around 33% by the end of our forecast period.

For additional details, select a driver above or select a division from the interactive Trefis split for eBay at the top of the page.

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eBay is known for operating the online marketplace eBay.com. The company's marketplace is where third-party buyers and sellers can transact in a variety of products including clothing, electronics, media, collectibles, automobiles and many other types of merchandise.  

The payment services arm PayPal was spun off from eBay in 2015. eBay also divested its Enterprise business for a deal valued at $900 million in 2015. Accordingly we have excluded both these businesses in our valuation model.

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Marketplaces Business Is Picking Up

The year-over-year growth rate in the marketplace business slowed down from 12% in 2012 to mid single digits through 2013 and 2014 before showing negative growth in 2015. The company had asked all its users to change their passwords as a safety measure – this led to a slowdown in buying activity as some users did not change their passwords but exercised caution. Changes in Google SEO algorithm also weighed on the business during the latter half of 2015. The recent strengthening of the U.S. dollar has also had a large impact on this segment in the recent past. Subsequently, transaction business picked up in 2016 and 2017 with significant contribution coming from StubHub and core marketplaces transaction revenues.

Growth In Global E-Commerce Volume

The global e-commerce market is growing at healthy rates owing to growing popularity of online shopping. According to eMarketer, the global retail e-commerce market is expected to grew from $1.3 trillion in 2014 to $2.4 trillion by 2017 and can continue to grow to become a $4 trillion market by 2020. In the event, eBay is able to overcome its challenges, it could benefit from this high demand in the market. However, owing to increased competition from Amazon, Alibaba and traditional retail giants, we expect eBay to under-perform the broader e-commerce market in the coming years.

Focus on Increasing Conversion Rate

Conversion rate is a key focus area for eBay, as it seeks to increase the success of sellers in converting listed items to sold items. eBay has implemented a number of features to increase the conversion rate on marketplaces and continues to improve customer experience on its marketplaces. eBay has also complemented these features with search engine optimization (SEO) changes and broadening its marketing channels to include social platforms. These efforts have resulted in active user base growing by 14% in 2013, 21% in 2014, which fell to low single digits in 2015, 2016 and 2017. We expect the growth to pick up in the next few years.

How Does Trefis Modelling Work?

How do we get the historical numbers for this chart?

Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.

Who came up with the Trefis forecast for future years?

The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.

How does my dragging the trendline on the chart impact the stock price?

1. We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
2. We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.

See more on: DCF Methodology

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