eBay’s stock (NASDAQ: EBAY) has lost roughly 31% YTD as compared to the 17% drop in the S&P500 index over the same period. However, at its current price of $46, the stock is trading 25% below its fair value of $61 – Trefis’ estimate for eBay’s valuation.
The company operates an online marketplace “eBay.com,” where third-party buyers and sellers can transact in a variety of products. While it surpassed the consensus estimates in the first quarter of 2022, the net revenues of $2.5 billion were still 6% lower than the year-ago figure. This was mainly due to the easing of Covid-19-related restrictions, and the re-opening of retail stores, leading to a decline in online sales on a year-on-year basis. Notably, eBay’s gross merchandise value (GMV) decreased 20% y-o-y in Q1. Further, the company presented a lower-than-expected growth outlook for the second quarter, which failed to impress the investors. This has made investors somewhat cautious about the stock, resulting in a 15% decline since the Q1 results.
Online sales numbers have normalized in 2022. Further, the tough macroeconomic outlook due to high inflation figures, aggressive interest rate hikes, and the Russia-Ukraine crisis is likely to hurt the consumer discretionary spending levels. Overall, we expect the net sales to see a year-on-year decrease in the second quarter. Notably, consensus estimates for Q2 revenues and earnings are around $2.37 billion and $0.89 respectively.
The firm posted strong results in 2021, with net sales increasing by 17% y-o-y to $10.4 billion. Moving forward, we expect the revenues to remain under pressure for the subsequent quarters. Altogether, eBay’s revenues are estimated to touch $10.2 billion in FY2022. Further, its net income from continuing operations is likely to remain around $2.3 billion. This coupled with an annual EPS of $3.77 and a P/E multiple of just above 16x will lead to the valuation of $61.
With inflation rising and the Fed raising interest rates, eBay has fallen 31% this year. Can it drop more? See how low can eBay stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||5%||-17%||77%|
|Trefis Multi-Strategy Portfolio||10%||-15%||236%|
 Month-to-date and year-to-date as of 7/21/2022
 Cumulative total returns since the end of 2016
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