Buy, Sell, Or Hold EBAY Stock?

The stock price of eBay (NASDAQ: EBAY) saw a 10% jump on Wednesday, January 8, after Meta announced that it would allow certain eBay listings to appear on Facebook Marketplace. A collaboration with Meta might strengthen eBay’s competitive standing in the e-commerce landscape. eBay has been struggling with falling gross merchandise volume (GMV), which fell from$87.4 billion in 2021 to $73.2 billion in 2023, due to a challenging macroeconomic environment.  Higher inflation and weak consumer sentiment have weighed on the company’s top-line growth. However, the company has seen a slight recovery in 2024. The recent move from Meta will help eBay improve its GMV, given the solid traffic Facebook sees. For Meta, this move comes after the European Commission imposed a penalty over alleged anticompetitive practices in its online classifieds business.

eBay stock has had a good past year – thanks to the recovery in GMV. It was up 45% in 2024, outperforming the broader S&P 500 index, up 23%. Looking at a slightly longer period, eBay has seen its stock rise 75% from levels of $40 in early 2023 to $63 now. This can be attributed to:

1. a 52% rise in the company’s P/S ratio from 2.3x in 2022 to 3.5x now;
2. a 5% rise in revenues from $9.8 billion to $10.3 billion over this period; and,
3. a 9% fall in total shares, thanks to $7 billion the company spent on share repurchases.

eBay’s revenue growth lately has been driven by growth in its focus categories, which includes auto parts and accessories, collectibles, handbags, refurbished goods, and luxury fashion. This has helped it see higher GMV and take rate over the recent quarters. The company has been targeting AI to bolster its sales by offering personalized recommendations. Its focus on certain categories, such as auto parts and accessories, seems to be working well for the company. Still, eBay faces tough competition from the likes of Amazon, Walmart, Etsy, and Temu, among others.

Looking at the company’s profitability, its operating margin declined from 24% in 2022 to 21.3% now. Given the fall in revenue and operating margin, eBay’s adjusted net income declined from $2.7 billion in 2022 to $2.4 billion now. However, its share repurchases helped the bottom line expand from $4.02 to $4.69 over this period.

Although EBAY has outperformed the broader markets lately, the increase in EBAY stock over the recent years has been far from consistent, with annual returns being more volatile than the S&P 500. Returns for the stock were 34% in 2021, -36% in 2022, 8% in 2023, and 45% in 2024. While EBAY stock has seen mixed growth over recent years, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has provided better returns with less risk versus the benchmark S&P 500 index over the last four year period; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment around rate cuts and weak consumer sentiment, 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? From a valuation perspective, we think it’s fully valued. We estimate eBay valuation to be $60 per share, 13% below the current market price of $69. At its current levels, EBAY stock is already trading at over 13x its forward expected earnings of $5.21 per share in 2025. This compares with the stock’s average P/E ratio of 11x over the last five years.

While EBAY stock looks like it is fully valued, it is helpful to see how eBay’s peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 1/8/2025
[2] Cumulative total returns since the end of 2016

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