eBay Stock Is Up 26% YTD, What To Expect From Q2 Earnings?

eBay (NASDAQ: EBAY) stock gained 26% YTD as compared to a 13% rise in the S&P500 index. Notably, eBay’s peer Amazon (NASDAQ: AMZN) is up 20% YTD. Overall, eBay is scheduled to report its fiscal Q2 2024 results on Wednesday, July 31. We expect the stock to top the consensus estimates of revenues and earnings. The company surpassed the expectations in the last quarter, with net revenues increasing by 2% y-o-y to $2.56 billion. The growth was driven by the investment in focus categories and a higher take rate due to the expansion of promoted listings, eBay International Shipping, and payment services. Notably, the gross merchandise value (GMV) grew 1% y-o-y to $18.6 billion. We expect the same trend to continue in the second quarter. Our interactive dashboard analysis on eBay’s Earnings Preview has more details. 

Amid the current financial backdrop, EBAY stock has shown strong gains of 20% from levels of $45 in early January 2021 to around $55 now, vs. an increase of about 45% for the S&P 500 over this roughly 3-year period. However, the increase in EBAY stock has been far from consistent. Returns for the stock were 34% in 2021, -36% in 2022, and 8% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% 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 HD, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) 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 strong jump?

Our forecast indicates that eBay’s valuation is just below $53 per share, which is 3% below the current market price of around $54.

(1) Revenues to edge past the consensus

eBay’s revenues grew 3% y-o-y to $10.1 billion in FY2023. It was because of an increase in take rate (net revenues divided by GMV), somewhat offset by a 1% decrease in the GMV. While the take rate continued to drive results in Q1, GMV also witnessed a slight growth. We expect the same momentum to continue in the second quarter. Overall, eBay’s revenues are forecast to touch $10.28 billion in FY2024.

Trefis estimates eBay’s fiscal Q2 2024 net revenues to be around $2.54 billion, 1% above the $2.53 billion consensus estimate.

(2) EPS to top the estimates

eBay Q2 2024 adjusted earnings per share (EPS) is expected to be $1.14 per Trefis analysis, 2% below the consensus estimate of $1.12. The company’s net income improved from -$1.27 billion to $2.77 billion in FY 2023, mainly because of a significant jump in gain on equity investments. However, the firm posted a loss on equity investments of $98 million in Q1 vs. a profit of $198 million. That said, the impact was somewhat offset by lower operating expenses as a % of revenues. Altogether, the net income reduced 23% y-o-y to $438 million. We expect the net income margin to see improvement in Q2. Overall, the company is likely to report a revenue-per-share (RPS) of $20.40 in FY2024.

(3) Stock price estimate is 3% below the current market price

We arrive at eBay’s valuation, using a revenue per share (RPS) estimate of around $20.40 and a P/S multiple of 2.6x in fiscal 2024. This translates into a price of $53, which is 3% lower than the current market price. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year 

[1] Returns as of 7/29/2024
[2] Cumulative total returns since the end of 2016

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