EBAY Stock Forecast: Why eBay Remains Relevant

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

  • I am again endorsing eBay as a buy for investors who like the growing $3.45 trillion retail e-commerce business. This company’s stock is also relatively undervalued.
  • I went long on this company because eBay is still a worthy alternative to Amazon.com for online shopping. The GMV in the United States is dropping but eBay’s international GMV is growing.
  • The online auction industry is also growing at 7.2% CAGR. eBay remains the world’s top online auction site. It has 180 million active buyers and 25 million sellers.
  • Q1 earnings showed eBay still touts a growing number of active buyers. This is helping eBay post year-over-year growth in EPS and revenue.
  • StubHub, Classifieds, and Payments business segments are also growing.

The big 7% 5-day surge in eBay’s (EBAY) stock price is largely due to its impressive Q1 2019 earnings report. EBAY now flaunts a YTD price increase of +37.23%. I still rate this legendary e-commerce company as a buy. The first quarter results illustrated that eBay is growing the number of its active buyers. More importantly, revenues from StubHub, Classifieds, and Payments are all growing year-over-year.

(Source: Seeking Alpha)

The long-term growth and prosperity of eBay is insured. The company has a powerful global brand that has a loyal army of 180 million active buyers. My takeaway is that EBAY deserves a higher valuation when you consider that it has this massive 180 million-strong customer base. This huge number of active buyers makes eBay a long-term beneficiary of the growing $3.45 trillion global retail e-commerce industry.

eBay operates in more than 30 countries. It is therefore a true global player in online retail. Further, the online auction business is also growing at 7.2% CAGR. EBAY is a buy because it remains the world’s biggest online auction website.

(Source: Statista)

EBAY is Relatively Undervalued

It is painful to see that EBAY has much lower P/E valuation ratios than ETSY, Inc. (ETSY) and Amazon (AMZN). Value-minded growth investors will agree with my assessment that EBAY is great bargain investment right now with its P/E ratio of 13.89x. EBAY’s EV/EBITDA valuation is also much lower at 12.91x. Etsy, a much smaller company, has a 102.50 P/E valuation.

(Source: SeekingAlpha)

EBAY is not growing its annual revenue as quickly as Etsy and Amazon have been doing for the past five years. However, eBay’s steady 5-year 11.45% annual sales increase rate still makes it a growth stock. The 3-year sales growth rate of eBay is actually higher, 15.52%.

(Source: Stockrow.com)

Yes, eBay’s American operations is declining. However, the international business of eBay is growing fast enough to offset the decline in the U.S. This year’s return to India is great for eBay’s international expansion. India has more than 1 billion citizens. They could help eBay increase its yearly international sales by 5% to 10%.

(Source: eBay)

The missed opportunity in Southeast Asia can be compensated by a strong sales performance in India. The passiveness of eBay allowed Lazada and Shopee to dominate Southeast Asia’s online retail business.

Deployment of Artificial Intelligence

Another tailwind to eBay’s future prosperity is its 2017 deployment of artificial intelligence on its online and mobile platforms. Both sellers and buyers on eBay now gets the benefit of machine learning-driven online shopping. AI helps seller optimize the pricing of their products for sale. It also helps them detect fraud and manage inventory and delivery of their sold products.

The AI features are derived from eBay’s collected data from its two decades of operations. The 25 million sellers on eBay now enjoy AI-powered processes that allows them faster way to re-target potential buyers. AI also helps them localize and personalize their products to build better long-term relationships.

The Other Segments Are Growing

Investors should take note that eBay’s other business segments are growing. StubHub, the online ticket exchange portal, now contributes more than $1.06 billion in annual revenue. Marketing, Classifieds, and Payments are also growth drivers for EBAY. They now contribute $2.26 billion/year to eBay’s topline.

(Source: Statista)

There are now more than 4,300 eBay sellers that adopted Payments. The Q1 slides presentation also showed that eBay Classifieds is averaging $255 million in quarterly revenue.

(Source: eBay)

StubHub is an under-the-radar growth driver for eBay. It will likely become a $3 billion/year tailwind for eBay once more people starts buying their concert tickets online. The global concert ticket market is growing at almost 7% CAGR. It will be worth $24.55 billion by 2021.

Conclusion

I went long on eBay because I believe in its long-term prosperity as an e-commerce facilitator. Online shopping is a fast-growing industry that will keep eBay profitable and growing. This company’s stock is relatively cheap compared to other e-commerce leaders like Amazon and Alibaba (BABA).

My buy recommendation for EBAY is also largely due to its very bullish 1-year algorithmic market trend forecast score of +241.33. I Know First has a predictability score of 0.62 under EBAY’s one-year price trend. I Know First therefore has a good record of correctly predicting the past 12-month performance of eBay’s stock.

How to interpret this diagram.

Past I Know First Forecast Success With EBAY

I Know First Algorithm successfully forecasted the EBAY stock in the past. On January 1, 2019, I Know First algorithm issued a bullish 3 months forecast for eBay with a signal of 2.30 and a predictability of 0.47. After 3 months, EBAY’s shares rose by 35.09%, in line with I Know First algorithm’s forecast. See chart below.

This bullish forecast for EBAY was sent to the current I Know First subscribers on January 1, 2019.

To subscribe today click here.

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