eBay’s stock (NASDAQ: EBAY) has lost roughly 32% YTD as compared to the 13% drop in the S&P500 index over the same period. However, at its current price of $46, the stock is trading 14% below its fair value of $53 – 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 topped the consensus estimates in the second quarter results, the net revenues were down 9% y-o-y to $2.42 billion. It was primarily driven by an 8% drop in the net transaction revenues, due to a decline in website traffic from the elevated levels seen in the year-ago period. Further, the key metric – Gross Merchandise Volume (GMV), decreased by 18% in the quarter. Notably, the re-opening of offline stores, normalization of consumer behavior, and tough macroeconomic conditions led to negative growth in the top line. On the expense front, the operating margin decreased from 27.4% to 21.7% due to the higher cost of revenues. Further, loss on equity investment and warrant increased from $273 million to $1.2 billion. It led to a profit before tax (PBT) of -$727 million, as compared to the figure of $401 million in Q2 2021.
The net revenues increased 17% y-o-y to $10.4 billion in 2021. It was mainly due to higher than usual sales volume due to the Covid-19 crisis. That said, the online sales numbers have normalized in 2022. Markedly, the GMV for the first half of 2022 was down 19% y-o-y, leading to a 6% drop in net revenues to $4.97 billion. We expect the same trend to continue over the subsequent quarters. Altogether, eBay’s revenues are estimated to remain around $9.7 billion in FY2022. Further, the revenue per share (RPS) is likely to increase from $15.72 to $15.99 in the year. This coupled with a P/S multiple of just above 3x will lead to the valuation of $53.
|S&P 500 Return||0%||-13%||85%|
|Trefis Multi-Strategy Portfolio||-1%||-14%||241%|
 Month-to-date and year-to-date as of 8/25/2022
 Cumulative total returns since the end of 2016
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