eBay Inc.

EBAY Details

eBay Inc. (NASDAQ: EBAY) is one of the world's leading platforms for finding amazing deals on various items. In addition, eBay offers various incentives, such as fee reductions, discounts on products sold, coupons, and prizes, to maintain traffic on its platforms. Presently, the company only has one business area, "Marketplace," which is its online marketplace at "www.ebay.com." eBay makes money from two sources: net transaction revenue, which includes fees for promoting listings and listing fees from sellers on its platform, as well as store membership and other fees; and marketing services and other revenue, which includes revenue from the sale of advertising and revenue sharing agreements. As of June 30, 2021, the company had 159 million global active buyers with approximately 19 million global active sellers.

Partnership with Lightsource to power US operations: eBay signed arrangements with Lightsource BP, a worldwide leader in the construction and administration of solar energy projects, to buy solar power from Louisiana's largest solar project on August 4, 2021. The Ventress Solar project, with a capacity of 345 megawatts, will assist eBay in meeting its sustainability targets and advancing its commitment to climate change.

Partial Stake Sale in Adevinta to Permira: On July 14, 2021, eBay stated that it has agreed to sell roughly 125 million shares of its holding in Adevinta, a worldwide online ads expert, to Permira, a renowned global investment firm, for a total consideration of USD 2.25 billion. The deal is scheduled to conclude in Q4 2021 and will reduce eBay's stake in Adevinta from 44% to 34%.

Robust 6MFY21 Results: The company reported a 27.61% rise in net revenue to USD 5.3 billion during 6MFY21 (ended June 30, 2021) compared to USD 4.16 billion during 6MFY20, primarily due to an increase in Gross Merchandise Volume (GMV) with a higher take rate. In addition, eBay reported an increase in net income to USD 11.38 billion during 6MFY21 vs. USD 4.16 billion during 6MFY20, primarily due to the one-time inclusion of income from discontinued operations in Q1FY20. As of June 30, 2021, its cash and cash equivalents (including short-term investments and equity investment in Adevinta) were USD 17.21 billion, with a total debt of USD 9.09 billion.

Key Risks: Due to the fast growth in virtual opportunities during the Covid-19 pandemic, internet companies face fierce competition. Platform companies such as Alibaba, Amazon, Apple, Facebook, and Google are eBay's main competitors. In addition, some existing and future rivals have a longer track record, a larger customer base, and a more well-known brand. As a result, any decrease in demand for the company's marketplace platforms might harm the company's operations and cash flows.

Outlook: In its Q2FY21 press release, eBay stated that it expects Q3FY21 revenue to be between USD 2.42 to USD 2.47 billion, representing a 6-8% YoY growth. eBay also anticipates its diluted GAAP EPS to be in the range of USD 0.64 to USD 0.68.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

EBAY Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: eBay's stock price has risen 52.44% in the past nine months and is currently trading in the higher band of the 52-weeks range of USD 45.36 to USD 76.55. The stock is currently trading significantly above its 50 and 200 DMA levels, and its RSI Index is at 61.77. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 66.45. Considering the significant rise in the stock price, we believe it adequately reflects the decent business fundamentals. Hence, we recommend a "Sell" rating on the stock at the current price of USD 73.99, up 1.58% as of August 18, 2021, at 12:59 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.