eBay Inc.

EBAY Details

eBay Inc. (NASDAQ: EBAY) is one of the world’s largest marketplaces for identifying great value and a unique selection of goods. The company provides global marketplace platforms for both buyers and sellers. In addition, eBay provides various compensations like discounts on fees, discounts on items sold, coupons, rewards, etc., to increase the continuity of traffic on its platforms. The company currently deals in one segment only named "Marketplace," its online marketplace located at “www.ebay.com.” As of 31 March 2021, the company had 187 million global active buyers with approximately 20 million global active sellers. As of June 07, 2021, the company’s market capitalization stood at USD 44.43 billion.

Continuous Increase in Active Buyers (Source: Earnings Presentation, April 28, 2021)

Expanding Authenticity Guarantee service to Bolster Luxury Momentum: On June 02, 2021, the company announced the extension of its Authenticity Guarantee service to include handbags. Since the date, any new or used handbag sold greater than USD 500 from 16 luxurious brands is being professionally authenticated. EBAY has already provided its Authenticity Guarantee services for watches and sneakers in late 2020, which has helped drive significant growth in these categories.

Robust Q1FY21 Results: The company reported a massive increase of 42% in net revenue to USD 3,023 million in Q1FY21 (ending March 31, 2021) as compared to USD 2,129 million in Q1FY20 (ending March 31, 2020), primarily due to an increase in Gross Merchandise Volume (GMV) with higher Take Rate. The company reported a strong increase of 35.21% in Gross Profit to USD 2,200 million in Q1FY21 compared to USD 1,627 million in Q1FY20. However, the company reported an 81.21% decline in net income to USD 641 million in Q1FY21 than USD 3,412 million in Q1FY20, primarily due to one-time inclusion of income from discontinued operations in Q1FY20.

Key Risks: During the Covid-19 pandemic, there is intense competition in online businesses due to the rapid increase in virtual opportunities. eBay's biggest competitors are platform businesses like Alibaba, Amazon, Apple, Facebook, and Google. Some current and potential competitors have a longer operating history, a large client base, and greater brand recognition. Therefore, any decline in demand for the company’s marketplace platforms may harm the operational and financial affairs of the company.

Outlook:

Q2FY21 Guidance (Source: Earnings Presentation, April 28, 2021)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Data Source: REFINITIV, Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E 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 30.82% in the past six months and is currently trading at a higher band of the 52-weeks range of USD 45.36 to USD 65.89. The stock is currently trading above its 200 DMA levels. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 70.57. Considering the company’s market dominance, initiatives to lock in the recent growth momentum, balance sheet strength, and current valuation, we recommend a "Hold" stance on the stock at the closing price of USD 65.45 up by 0.34% as of June 07, 2021.

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

Baker Hughes Company

BKR Details

Baker Hughes Company (NYSE: BKR) was created from the merger of Baker Hughes Incorporated (BHI) and the oil and gas business (GE O&G) of General Electric Company (GE) in 2017. BKR is an energy technology company that provides a wide range of technologies and services covering the energy and industrial value chain. BKR provides oilfield products, services, and digital solutions to more than 120 countries within the upstream, midstream, and downstream segments. The company operates in four segments, namely 1) Oilfield Services (OFS), 2) Oilfield Equipment (OFE), 3) Turbomachinery & Process Solutions (TPS), and Digital solutions (DS). As of June 07, 2021, the company’s market capitalization stood at USD 27.10 billion.

Delivered drilling tech project for Aramco: On June 01, 2021, the company announced the deployment of industry-leading remote operations digital technology across Saudi Aramco’s drilling operations, covering 200+ sites, the largest deployment in the history of Baker Hughes. The project also supports Aramco’s effort to drive digital opportunities, boost operating performance, and reduce emissions.

Q1FY21 Results: The company reported an 11.85% decline in net revenue to USD 4,782 million in Q1FY21 (ending March 31, 2021) compared to USD 5,425 million in Q1FY20 (ending March 31, 2020). This is primarily due to a 17.91% Yoy decline in the number of orders to USD 4,541 million in Q1FY21 compared to USD 5,532 million in Q1FY20. In addition, the company recorded a loss of USD 605 million in Q1FY21 compared to the loss incurred of USD 16,098 million in Q1FY20 due to goodwill impairment of USD 14,773 million in Q1FY20. The company recorded a massive increase in free cash flow (non- GAAP) by 227.63% to USD 498.00 million during Q1FY21 compared to USD 152 million during Q1FY20.

Key Risks: During the Covid-19 pandemic, the entire industry witnessed a decline in oil demand, resulting in a decline in oil prices. The persistent increase in the Covid-19 pandemic could further destabilize the markets. Any significant change in commodity prices could produce an adverse impact on the company’s financial conditions.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Data Source: REFINITIV, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

BKR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation BKR’s stock price has surged by 78.52% in the past nine months and is currently trading at a higher-band of the 52-weeks range of USD 12.13 to USD 26.57. The stock is currently trading above its 200 DMA levels. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 27.58. Considering the significant rise in the stock price in the past nine months, completion of orders, significant free cash-flows, and current valuation, we recommend a "Hold" rating on the stock at the closing price of USD 25.94, down by 0.31% as of June 07, 2021.

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