Why eBay’s Stock Increased 37% In The Last Year

January 31st, 2017 by Trefis Team
-4.69%
Downside
51.25
Market
48.85
Trefis
EBAY: eBay logo
EBAY
eBay

eBay‘s (NASDAQ:EBAY) stock is up 37% in the last one year following strong results in the last three quarters of 2016. In full year 2016, eBay’s top line grew 5% year-over-year (y-o-y) to about $9 billion, driven by strong growth in StubHub and marketing and advertising revenue. The year was marked by four consecutive quarters of sales growth for the company, primarily driven by:  1) structuring data into catalogs (for search engine optimization); 2) diversifying traffic sources; 3) enhancing the seller experience; and, 4) trimming down the asset portfolio.

Driven by a 20% decline in general and administrative costs, the company’s operating income grew 6% to over $2.3 billion, with operating margin improving by 30 basis points.ebay-30

Devin N. Wenig, eBay’s President and CEO, stated last year that the company’s strategy was to maintain a low-to-mid single digit top-line growth rate and keep margins and free cash flows high. eBay was able to achieve this target last year and it returned about $3 billion to shareholders in the form of share buybacks. The company has stated that it intends to return about 50% of its free cash flows to shareholders this year as well.

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Management was sketchy in providing details with respect to its acquisition plans in 2017 but stated that it could spend a part of its remaining cash on opportunistic acquisitions over the next two years.
ebay-31 Segment Results

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According to our estimates, the number of active users on eBay’s platform, which is a key driver of its valuation, will increase steadily from 167 million in 2016 to around 206 million by the end of our forecast period.

There can be a 10% upside to our price estimate, if this number increases at a faster pace and reaches around 240 million by the end of our forecast period.

Full Year & Q4 Guidance

In full year 2017, eBay expects its revenues to grow 3-6% y-o-y to $9.3-$9.5 billion and adjusted earnings to grow 4-7% to around $2.00 per share.

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Have more questions about Ebay? Please refer to our complete analysis for Ebay

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