The eBay stock forecast article was written by Chloe Peng, Analyst at I Know First. Master of Science of Finance candidate at Brandeis University.

Summary

• eBay stock price increased by 59.31% in the past 6 months, benefitting from the global pandemic.
• The online retail market size is expected to grow to $6.5 trillion in 2023 and eBay rises as the second most popular company in the industry.
• eBay is currently undervalued and I have a 1-year target price of $75.

eBay stock price increased by 59.31% in the past six months. The impressive growth was partly because eBay might sell its classifieds units, but mostly due to the growth of online retail market. Like many other e-commerce companies, it benefitted from Covid-19 shutdown that keeps people at home through March, April and May. Even though the economy is reopening, consumers continue to shop through online retail channels because people are afraid of possible resurgence of the virus. The questions are, how long will the trend persist and whether eBay stock will keep growing. In this article, I will present you the current market situation and an analysis of the company to show you why I have a long-term bullish outlook for eBay.

Company Background

eBay is a global commerce provider, which includes its Marketplace, StubHub and Classifieds platforms. Its Marketplace platforms include its online marketplace, its localized counterparts and the eBay suite of mobile apps. StubHub platforms does online ticket selling business with its localized counterparts and the StubHub mobile apps. These platforms connect fans with their favorite sporting events, shows and artists and enable them to buy and sell tickets whenever and wherever they want. Classifieds platforms include a collection of brands such as mobile.de, Kijiji, Gumtree and others.

Online Retail Market and eBay’s Presence

We have all witnessed the e-commerce boom during the pandemic and online purchasing is no longer only popular with young people. Even my grandparents start to purchase items online. The coronavirus really boosted the stocks of online retail companies. The Amplify online retail ETF (iBuy) soared by 44% in the past 6 months. The pandemic didn’t stop people from spending money. According to Adobe’s latest data on e-commerce, despite the uncertainty around coronavirus, it was like Christmas in May. Digital sales were up 77.8% year over year last month to $82.5 billion, tracking higher than holiday shopping levels on Black Friday and Cyber Monday.

Moreover, people are confident that people will continue to favor online purchasing and the growth trend will continue. According to Statista.com, the global online retail market will grow to more than $6.5 trillion by 2023 versus $3.5 trillion in 2019. In fact, in 2021, 2.1 billion shoppers are expected to order online. See the following chart of retail e-commerce market size estimation.

eBay has benefitted a lot as one of the most popular online marketplaces in the US, second to Amazon. See chart below. Although Amazon has pretty much dominated the market, eBay is still competitive among smaller players. Since the online retail market is expected to grow fast in the long run, eBay is very likely to benefit from future market growth.

eBay’s Satisfying Earning Ability and Worrisome Growth Rate

On June 4, eBay changed its Q2 revenue to $2.75 to $2.8 billion from its April guidance of $2.38 billion to $2.48 billion and its Q2 adjusted EPS to $1.02 to $1.06 from $0.73 to $0.8, due to surprisingly good business performance during the quarter. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions as a sign of optimism about the company’s business outlook. You see from the following graph that the company’s EPS has beaten estimations for the past 4 quarters. This is a very positive sign for investors, indicating that eBay has outstanding earning abilities.

Moreover, when you compare eBay to its peers, you see that eBay is very profitable. For example, it has a 10 times higher net income margin than Amazon, because Amazon spend much more in R&D, Advertising and marketing than eBay.  eBay’s high profitability ratio partly results in its low growth rate which will be presented in the next part.

You may also discover that its revenue growth rate is largely falling behind. While its peer Amazon and Etsy enjoy 2-digits growth rate, eBay realizes very low growth potentials. The reason of low growth rates is probably reflected in the high profit margins, meaning that eBay might not spend much money in expanding the market and trying to win more market share. Since the company is about to sell its Classified division for around $8 billion, I expect eBay to have more cash for expansion.

eBay Stock Is Undervalued Comparing to Peers

eBay stock price has grown a lot but is still undervalued when you look at its P/E ratio. When we use Amazon and Etsy’s forward P/E to calculate eBay’s stock price, it directly soared to 3 to 8 times higher than its current price. See chart below.

eBay Stock Forecast – Conclusion

The online retail market has benefitted a lot from the global pandemic when people keep staying at home. I expect the market to expand for the next 3 years. eBay ranks the second most popular and largest online retail company in the US so that I’m confident that it will rise with the market in the long run. Moreover, eBay has outstanding earning abilities compared to peers and its EPS has beaten estimations for the past 4 quarters. Although the stock price has increased a lot in the past 6 months, it’s still undervalued, which is reflected in its low PE ratio.

Finally, my 1-year bullish eBay stock forecast is further justified by I Know First’s algorithm-based forecast, which gives eBay a 1-year signal of 147.89 with the predictability of 0.63.

Past Successful I Know First eBay Stock Forecast

On April 7 2020, I Know First Algorithm gave a very bullish 3-month eBay stock forecast, which ranked as the top performing predictions with a return of 82.81% in 3 months. See charts below.

Here at I Know First, our AI-based algorithm has modeled and predicted assets price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. Since 2011, we have been providing daily stock market predictions, gold prediction, forex forecast, oil prices forecast, and, in particular, aggressive stocks. Today, we are producing daily forecasts for over 10,500 assets. These forecasts generated by our quant trading tool are used by institutional clients, as well as private investors and traders to identify the best investment opportunities in the market.

To subscribe today click here.

Please note-for trading decisions use the most recent forecast.