eBay Stock To Beat The Consensus In Q3?

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EBAY
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eBay (NASDAQ: EBAY) is scheduled to report its fiscal Q3 2022 results on Wednesday, November 2, 2022. We expect the stock to edge past the consensus estimates. The company surpassed the street expectations in the last quarter, despite a 9% y-o-y drop in the net revenues. The top line suffered due to lower net transaction revenues driven by a decline in website traffic on a year-on-year basis. Further, the key metric – Gross Merchandise Volume (GMV) decreased by 18%. We expect the same trend to continue in Q3.

Our forecast indicates that eBay’s valuation is $54 per share, which is 35% above the current market price of around $40. Our interactive dashboard analysis on eBay’s Earnings Preview has more details. 

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(1) Revenues expected to edge past the consensus estimates

eBay’s revenues decreased 8% y-o-y to $4.91 billion in the first half of 2022. The primary source of the company’s income is net transaction revenue, which includes final value fees, feature fees, fees to promote listings, and listing fees from sellers on the platforms. The revenue stream suffered a 6% y-o-y drop in the first half due to lower website traffic. We expect the same trend to drive the third-quarter results. Further, eBay’s revenues are forecast to touch $9.7 billion for FY2022.

Trefis estimates eBay’s fiscal Q3 2022 net revenues to be around $2.36 billion, 2% above the $2.32 billion consensus estimate. 

(2) EPS is likely to beat the consensus estimates

eBay Q3 2022 adjusted earnings per share (EPS) is expected to be $0.95 per Trefis analysis, marginally beating the consensus estimate of $0.93. The company’s adjusted net income decreased from $11.4 billion to -$1.9 billion in the first half of 2022. It was mainly due to a higher loss on equity investments and warrants in 2022 and a one-time gain of $10.5 billion from discontinued operations in 2021. We expect the net income margin to improve in the third quarter. 

(3) Stock price estimate is 35% above the current market price

We arrive at eBay’s valuation, using a revenue per share (RPS) estimate of around $15.99 and a P/S multiple of just above 3x in fiscal 2022. This translates into $54, which is 35% higher than the current market price of close to $40. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year 

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Oct 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 EBAY Return 10% -39% 36%
 S&P 500 Return 9% -18% 74%
 Trefis Multi-Strategy Portfolio 7% -22% 210%

[1] Month-to-date and year-to-date as of 10/31/2022
[2] Cumulative total returns since the end of 2016

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