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eBay Stock: Analyzing the Downward Trend and Future Prospects

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eBay (NASDAQ: EBAY) is set to announce its fiscal Q3 2023 results on Tuesday, November 7. We anticipate the company surpassing consensus estimates for revenues and earnings. In the previous quarter, eBay exceeded expectations with a 5% year-on-year increase in net revenues, reaching $2.54 billion. This impressive growth occurred despite a drop in web traffic across most markets, leading to a 2% decline in gross merchandise value (GMV). The improved take rate, calculated by dividing net revenues by GMV, contributed significantly to the company’s top line. We expect this positive trend to continue in Q3. To delve deeper into eBay’s earnings preview, refer to our interactive dashboard analysis.

Though eBay stock has experienced a decline of 20% since early January 2021, dropping from $50 to approximately $40, the performance has been inconsistent. Returns for the stock were 32% in 2021, -38% in 2022, and -7% in 2023 (YTD). In comparison, the S&P 500 has seen returns of 27% in 2021, -19% in 2022, and 8% in 2023 (YTD), indicating that eBay underperformed the S&P in 2022 and 2023. It has been challenging for individual stocks to consistently outperform the S&P 500 in recent years, even for heavyweights like Amazon, Tesla, Microsoft, Alphabet, and Apple. However, the Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 each year. It is evident that HQ Portfolio stocks provide better returns with lower risk compared to the benchmark index. Given the current macroeconomic uncertainties, such as high oil prices and elevated interest rates, could eBay face a similar situation as in 2022 and 2023 and underperform the S&P in the next 12 months, or will it stage a recovery?

Our forecast indicates that eBay’s valuation is $48 per share, which is 26% above the current market price of around $38.

eBay Stock Image

(1) Revenues to Marginally Beat the Consensus

eBay’s revenues grew 3% year-on-year to $5.05 billion in the first six months of FY2023, despite a 4% drop in GMV. The higher take rate more than offset the decline. We expect similar results for the third quarter. The forecast suggests eBay’s revenues touching $10.1 billion in FY2023. Trefis estimates eBay’s fiscal Q3 2023 net revenues to be around $2.39 billion, 1% higher than the $2.36 billion consensus estimate.

(2) EPS to Top the Estimates

eBay Q3 2023 adjusted earnings per share (EPS) is expected to be $0.97, surpassing the consensus estimate of $0.94. The company’s profit before tax (PBT) increased from -$2.34 billion to $1.02 billion in the first half of 2023. This improvement was driven by a decrease in loss on equity investments and warrants from $3.5 billion to $16 million, offsetting higher operating expenses. We anticipate this positive trend to continue in Q3, leading to an estimated revenue per share (RPS) of $19.89 in FY2023.

(3) The Stock Price Estimate is 26% Above the Current Market Price

Based on a revenue per share (RPS) estimate of approximately $19.89 and a price-to-sales (P/S) multiple of slightly above 2.4x in fiscal 2023, our valuation for eBay is $48 per share. This valuation represents a 26% increase compared to the current market price.

Returns Oct 2023
MTD [1]
YTD [1]
Total [2]
EBAY Return -13% -7% 29%
S&P 500 Return -3% 8% 85%
Trefis Reinforced Value Portfolio -5% 17% 501%

[1] Month-to-date and year-to-date as of 10/27/2023
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market Beating Portfolios.

Disclaimer: The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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