eBay, Inc. (EBAY) is one of the largest online marketplaces in the world, with more than 159 million active buyers worldwide. The  San Jose, Calif.-based company released its second-quarter financial results before the markets opened today to a mixed market response. Although the company topped the consensus EPS estimate for this quarter, it missed revenue estimates.

eBay’s revenues increased 14% year-over-year to $2.70 billion, missing the Street’s $3 billion estimate. Its EPS came in at $0.99, which is 2.1% higher than the $0.97 consensus estimate.

However, the company’s gross merchandise volume fell 7% year-over-year to $22.10 billion, while its income from continuing operations declined 57% from the same period last year to $294 million. While the stock has gained 35.4% year-to-date, it has lost 2.1% over the past month.

Here’s what could shape EBAY’s performance in the near term:

Restructuring of Operations

On July 14, EBAY sold 10%, or 125 million shares, of its stake in online classifieds specialist Adevinta to Permira for $2.25 billion. The agreement, which is expected to close in the fourth quarter, will reduce EBAY’s stake in Adevinta to 34%.

On the previous day, the company announced that it sold its Korean businesses to Emart. As a result, the Korean businesses’ financials have been reported under ‘Discontinued Operations’ in the most recent quarter.

Stable Growth Outlook

Analysts expect EBAY’s revenues to rise 11.1% in its fiscal third quarter (ending September 2021), 17.2% in fiscal 2021, and 6.6% next year. The consensus EPS estimates indicate a 5.9% year-over-year rise in the current quarter, a 15.8% rise in the current year, and a 14.4% rise in 2022. In addition, the Street expects EBAY’s EPS to rise at a 13.2% CAGR over the next five years.

Furthermore,  the company surpassed the Street’s EPS estimates in three out of the trailing four quarters.

Stretched Valuation

In terms of non-GAAP forward P/E, EBAY is currently trading at 17.34x, which is 8.4% higher than the 16x industry average. In addition, the stock’s 1.42 non-GAAP forward PEG ratio is 28.1% higher than the 1.11 industry average.

Its forward Price/Sales and Price/Book multiples of 4.04 and 45.12, respectively, are significantly higher than the 1.30 and 3.74 industry averages. EBAY’s 12.36 forward EV/EBITDA ratio  is 12.8% higher than the 10.96 industry average.

Consensus Rating and Price Target Reflect Potential Upside

Of the six Wall Street analysts that rated EBAY, five rated it Buy while one rated it Hold. The $77.67 12-month median price target indicates a 14.2% potential upside from yesterday’s $68.02 closing price. The price targets range from a low of $70.00 to a high of $85.00.

POWR Ratings Reflect Uncertainty

EBAY has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

It has a grade of C for Momentum and Stability. The stock is currently trading above its $62.82 200-day moving average, but below its $69.15 50-day moving average, which is in sync with the Momentum grade. Furthermore,  its relatively high 1.09 beta is consistent with its Stability grade.

Of the 73 stocks in the Internet industry, EBAY is ranked #12.

In addition to the grades highlighted, we have also rated EBAY for Value, Sentiment, Quality, and Growth. View all eBay ratings here.

Click here to view the top-rated stocks in the Internet industry.

Bottom Line

As a renowned multinational e-commerce company, eBay has a stable growth outlook. However, its mixed earnings results indicate consumers’ shifting focus to  outdoor activities. With consumer behavior currently fluctuating given the resurgence of COVID-19 cases, we think investors should wait for a little more stability before investing in EBAY.

EBAY shares were trading at $68.54 per share on Thursday afternoon, up $0.52 (+0.76%). Year-to-date, EBAY has gained 37.25%, versus a 19.71% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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