Why eBay Stock Offers Limited Upside Potential Despite The Recent Decline

by Trefis Team
-4.63%
Downside
73.26
Market
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Trefis
EBAY
eBay
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Comparing the trend in eBay‘s (NASDAQ:EBAY) stock over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock only offers potential gains of around 10%, and that too after fears surrounding the coronavirus outbreak subside. Our conclusion is based on our detailed comparison of eBay’s performance against the S&P 500 in our interactive dashboard analysis, ‘2007-08 vs. 2020 Crisis Comparison: How Did eBay Stock Fare Compared with S&P 500?

The World Health Organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. Between January 31st and March 30th, eBay’s stock has lost less than 7% of its value – well below the 21% decline in the S&P 500 over this period. 

eBay’s Stock Has Fallen Because The Situation On The Ground Has Changed:

eBay’s stock has suffered as states and countries are on lockdown. As industries have halted production, the demand for online marketplaces has also taken a hit with consumers focusing solely on essentials products. We believe eBay’s Q1 and Q2 results will confirm this reality with a drop in revenues across all the segments. 

 

In comparison, eBay’s Stock Fared Much Worse During The 2008 Downturn

We see eBay’s stock declined from levels of around $16.37 in October 2007 (the pre-crisis peak) to roughly $4.49 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 73% of its value from its approximate pre-crisis peak. This marked a higher drop than the broader S&P, which fell by about 51%.

The sharp decline then meant that eBay recovered strongly post the 2008 crisis – rising by 116% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

 

eBay’s stock Hasn’t Taken A Hit This Time Around, And That Limits The Upside Potential Going Forward

Keeping in mind the fact that eBay’s stock has fallen by 6.6% this time as opposed to the 72.6% decline during the 2008 recession, we see a potential rebound of not more than 10% to levels of around $34 once economic conditions begin to show signs of improving. This marks a full recovery to the $33 level eBay’s stock was at before the coronavirus outbreak gained global momentum. 

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

 

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture and complements our analyses of Coronavirus impact on its sector peer like Ford. The complete set of coronavirus impact and timing analyses is available here.

 

 

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