Up 17% YTD, What To Expect From eBay Q1 Results?

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Trefis
EBAY: eBay logo
EBAY
eBay

eBay (NASDAQ: EBAY) is scheduled to report its fiscal Q1 2024 results on Wednesday, May 1. We expect the stock to post mixed results with revenues beating the consensus but earnings missing the mark. The company outperformed the street estimates in the last quarter, with net revenues increasing by 2% y-o-y to $2.6 billion. The rise was due to a 33% growth in first-party advertising product revenues and a 2% gain in gross merchandise value (GMV). On the flip side, a slight decline in the active buyers negatively impacted the top line. We expect the same trend to continue in Q1. Our interactive dashboard analysis on eBay’s Earnings Preview has more details. 

Amid the current financial backdrop, EBAY stock has seen little change, moving slightly from levels of $50 in early January 2021 to around $50 now, vs. an increase of about 35% for the S&P 500 over this roughly 3-year period. Overall, the performance of EBAY stock with respect to the index has been lackluster. Returns for the stock were 32% in 2021, -38% in 2022, and 5% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – 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 strong jump?

Our forecast indicates that eBay’s valuation is $49 per share, which is 5% below the current market price of around $51. 

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(1) Revenues to beat the consensus

eBay’s revenues grew 3% y-o-y to $10.1 billion in FY2023. It was due to a higher take rate (net revenues divided by GMV), partially offset by a 1% drop in the GMV. That said, the GMV has seen some recovery in the last quarter. We expect the momentum to continue in Q1. Overall, eBay’s revenues are forecast to touch $10.2 billion in FY2024.

Trefis estimates eBay’s fiscal Q1 2024 net revenues to be around $2.45 billion, 3% above the $2.37 billion consensus estimate. 

(2) EPS to marginally miss the estimates

eBay Q1 2024 adjusted earnings per share (EPS) is expected to be $1.11 per Trefis analysis, 2% below the consensus estimate of $1.13. The company’s net income improved from -$1.27 billion to $2.77 billion in FY 2023. It was primarily due to a jump in gain on equity investments from -$3.8 billion to $1.8 billion, partially offset by higher operating expenses as a % of revenues. We expect the same trend to continue in Q1. Overall, the company is likely to report a revenue-per-share (RPS)) of $20.26 in FY2024. 

(3) Stock price estimate is 5% below the current market price

We arrive at eBay’s valuation, using a revenue per share (RPS) estimate of around $20.26 and a P/S multiple of 2.4x in fiscal 2024. This translates into a price of $49, which is 5% lower than the current market price. 

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 

 Returns Apr 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 EBAY Return -3% 17% 72%
 S&P 500 Return -3% 6% 127%
 Trefis Reinforced Value Portfolio -6% 1% 615%

[1] Returns as of 4/25/2024
[2] Cumulative total returns since the end of 2016

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