eBay’s stock (NASDAQ: EBAY) has lost roughly 4% YTD, as compared to the 14% rise in the S&P500 index. However, at its current price of $40, the stock is trading 13% below its fair value of $46 – Trefis’ estimate for eBay’s valuation.
Amid the current financial backdrop, EBAY stock has seen a decline of 20% from levels of $50 in early January 2021 to around $40 now, vs. an increase of about 15% for the S&P 500 over this roughly 3-year period. However, the decrease in EBAY stock has been far from consistent. Returns for the stock were 32% in 2021, -38% in 2022, and -4% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 14% in 2023 (YTD) – indicating that EBAY underperformed the S&P in 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and TM, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could EBAY face a similar situation as it did in 2022 and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?
The company outperformed the consensus estimates of earnings in the third quarter of 2023, while the revenues were in line with expectations. It posted total revenues of $2.5 billion – up 5% y-o-y, driven by higher take rate (net revenues divided by gross merchandise value) and investment in focus categories. Notably, the gross merchandise value (GMV) improved 2% y-o-y in the quarter. On the expense front, the operating expenses as a % of revenues witnessed a favorable drop. Further, the income from equity investments grew from -$593 million to $1.2 billion. Overall, it resulted in a net income of $1.3 billion as compared to the net loss of $69 million in the year-ago period.
The revenues grew 4% y-o-y to $7.55 billion in the first nine months of FY2023, primarily because of a higher take rate. However, the website traffic suffered over the same period due to tough macroeconomic conditions. Further, the GMV was reduced by 1% y-o-y. On the cost front, the operating expenses as a % of revenues increased from 66% to 72%. That said, the negative impact was more than offset by a sizable jump in gain on equity investments from -$4.1 billion to $1.2 billion. Altogether, the net income improved from -$1.9 billion to $2 billion.
Moving forward, eBay’s revenues are estimated to touch $10.06 billion in FY2023. Further, the firm’s revenue per share (RPS) is likely to increase from $17.55 to $19.80 in the year. This coupled with a P/S multiple of 2.3x will lead to a valuation of $46.
|S&P 500 Return||5%||14%||96%|
|Trefis Reinforced Value Portfolio||3%||21%||521%|
 Month-to-date and year-to-date as of 11/9/2023
 Cumulative total returns since the end of 2016
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