eBay’s stock (NASDAQ
NDAQ
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. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 14% 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 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 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 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.
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