What Is eBay’s Fundamental Value Based On Expected 2018 Results?
eBay (NASDAQ:EBAY) reported somewhat mixed results last year, with mild revenue growth and a fall in margins. Revenue growth from its fastest-growing segment, StubHub, slowed down during the year, particularly in Q2 and Q3. Similarly, gross margins and operating margins compressed through the year. On a positive note, the company reported healthy growth in its Marketplaces business as well as from classifieds.
The company’s net transaction revenue was up 6% year-over-year to $7.5 billion, of which both StubHub and the core Marketplaces segment grew in mid single digits. StubHub witnessed limited growth in Q2 and Q3, due to which StubHub’s GMV was up only 5% for the year to $4.5 billion. This was significantly lower than the 20% growth observed in the previous year. On a positive note, GMV and revenue for StubHub picked up in Q4, driven by robust demand for concerts complemented by MLB playoffs and college football through the quarter. Furthermore, StubHub’s online ticketing business is expected to continue to drive growth in the mid-to-high single digits through 2018.
We forecast the revenue growth in the latter half of the year to continue through 2018. We have summarized our forecasts on our interactive dashboard platform, where you can modify assumptions such as changes in expected segment revenue or EBITDA margins to see how they impact the company’s value. The image above shows one of the key steps in identifying eBay’s valuation sensitivity to changes in its segment revenues. We detail how changes in revenue or segment EBITDA margin impacts total EBITDA, which in turn impacts enterprise value (assuming a constant EBITDA multiple).
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