EBay Stock Has Limited Upside

eBay’s stock (NASDAQ
NDAQ
: EBAY) has gained roughly 7% YTD, which is at par with the rise in the S&P500 index. However, at its current price of $44, the stock is trading 7% below its fair value of $48 – Trefis’ estimate for eBay’s valuation. The company posted better-than-expected results in the fourth quarter of 2022, despite a 4% y-o-y drop in total revenues to $2.5 billion. The top line mainly suffered due to a decrease in the active buyer base, down 9% y-o-y to 134 million. Further, the Gross Merchandise Volume reduced by 12% y-o-y in the quarter. Overall, the net income was $671 million in Q4, as compared to the $893 million loss in the year-ago period. It mainly benefited from a positive change in the fair value of equity investments.

The top line fell by 6% y-o-y to $9.8 billion in FY2022. Further, the GMV was down 15% y-o-y to $73.9 billion. Notably, the revenues suffered in 2022 due to the re-opening of offline stores and tough macroeconomic conditions, which led to a decrease in website traffic and lower GMV. On the expense front, total expenses as a % of revenues increased from 72% to 76% in the year. Further, the gain (loss) on equity investments changed from -$2.4 billion to -$3.8 billion. It resulted in a profit before tax of -$1.6 billion vs $398 million in 2021.

Moving forward, consensus estimates for Q1 2023 revenues and earnings are $2.48 billion and $1.07 respectively. Altogether, eBay’s revenues are forecast to remain around $9.9 billion in FY2023. Further, the firm’s revenue per share is likely to increase from $17.55 to $19.26 in the year. This coupled with a P/S multiple of just
just
below 2.5x will lead to a valuation of $48.

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