Headquartered in San Jose, California, eBay Inc. (EBAY) is one of the most popular online marketplaces that facilitates consumer-to-consumer and business-to-consumer sales through its websites. It operates through two platforms – Marketplace and Classified — that enable users to list, buy, sell, and pay for items through various online, mobile, and offline channels.
The retail landscape underwent a seismic shift from store-based strategies to digital ones amid last year’s COVID-19 carnage. An attendant worldwide lockdown of whole national populations resulted in a change in attitude by businesses and consumers toward the use of e-commerce platforms. This placed the most notable online marketplace, EBAY, on track to soar to its all-time high of $61.06, which it reached in July last year.
The company’s expanded buyer-seller features and diverse retail offerings have carried it to a 56.9% gain over the past year. This impressive performance combined with several other factors has helped EBAY earn a “Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates EBAY:
Trade Grade: A
EBAY is currently trading above its 50-day and 200-day moving averages of $50.85 and $49.84, respectively, indicating that the stock is in an uptrend. In fact, the stock gained 6.4%, over the past month, reflecting solid short-term bullishness.
EBAY’s revenue has increased 25.1% year-over-year to $2.61 billion for the third quarter ended September 30, 2020. The company’s annual active buyers increased 5% year-over-year, while its gross merchandise volume grew 22% on an as-reported basis. Its gross profit grew 25.6% from the year-ago value to $1.95 billion, while its EPS grew 154.1% over this period.
On December 22, EBAY delivered a last-minute Christmas sneaker surprise in partnership with NBA champion Anthony Davis. Through this event, customers could win one of 500 pairs of must-have sneakers such as the Air Jordan 1 Travis Scott and the Nike Air Max 97 Sean Wotherspoon. This boosted the company’s sales substantially, making the marketplace one of the largest channels to buy and sell sneakers.
On December 8, EBAY introduced a low-cost way for sellers to securely ship trading cards priced $20 less, beginning this month. This development should allow the company to meet the needs of sellers and grow its online platform.
Buy & Hold Grade: B
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, EBAY is well positioned. The stock is currently trading 9.2% below its 52-week high of $61.06, which it hit on July 13.
The company’s net revenue has grown at a CAGR of 7.1% over the past three years, while its EBITDA increased at a CAGR of 8.2% over this period. Also, EBAY’s levered free cash flow increased at a CAGR of 7.6% over the past three years. This growth is largely driven by higher customer engagement and strategic collaborations made by EBAY to launch new products on its platforms.
Peer Grade: B
While ETSY beat EBAY gaining 318.4% over the past year, GOOG and YNDX returned 20.6% and 55.7%, respectively, over this period.
Industry Rank: B
The Internet industry is ranked #22 of 123 StockNews.com industries. The companies in this industry concentrate on numerous online businesses, including online marketplace, content, auction exchanges, e-commerce sales, and advertising sales.
While the coronavirus pandemic has interrupted other industries in a variety of ways, the online business has not lost a beat. Its growth has accelerated with the shift toward digital connectivity and changes in peoples’ buying and selling behaviors that are likely to be lasting. Since a high level of caution regarding social re-engagement still exists even though many lockdowns have been eased worldwide, the progression of online purchasing is expected to continue in the coming months.
Overall POWR Rating: B (Buy)
EBAY is rated “Buy” due to its impressive financials, short- and long-term bullishness, solid price momentum, and underlying industry strength, as determined by the four components of our overall POWR Rating.
Based on the factors discussed here, we think EBAY is well positioned to rally back to its all-time high in 2021 despite gaining 56.9% over the past year. With online marketplaces gaining more traction, the company is expected to add millions of new buyers and sellers to its platform, thereby leading to substantial gains in its gross merchandise volume. Thus, it may be wise to invest on the stock now.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for EBAY. It has an average broker rating of 1.73, indicating favorable analyst sentiment. Of 29 Wall Street analysts that rated the stock, 5 rated it a “Strong Buy.” The consensus EPS estimate of $0.85 for the quarter ending March 31, 2021 represents a 23.2% improvement year-over-year. The consensus revenue estimate of $2.53 billion for the next quarter represents a 6.4% increase from the same period last year. This outlook should help EBAY reclaim its all-time high.
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EBAY shares were trading at $56.30 per share on Tuesday morning, up $0.88 (+1.59%). Year-to-date, EBAY has gained 12.04%, versus a 0.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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