admineBay (NASDAQ: EBAY) is scheduled to report its fiscal Q3 2023 results on Tuesday, November 7. We expect the stock to edge past the consensus estimates of revenues and earnings. The company surpassed the expectations in the last quarter, with net revenues increasing by 5% y-o-y to $2.54 billion. This was despite a drop in the web traffic in most markets, resulting in a 2% drop in the gross merchandise value. The top line mainly benefited from an improvement in the take rate (net revenues divided by gross merchandise value). We expect the same trend to continue in Q3. Our interactive dashboard analysis on eBay’s Earnings Preview has more details.
Amid the current financial backdrop, EBAY stock has seen a decline of 20% from levels of $50 in early January 2021 to around $40 now, vs. an increase of about 10% for the S&P 500 over this roughly 3-year period. However, the decrease in EBAY stock has been far from consistent. Returns for the stock were 32% in 2021, -38% in 2022, and -7% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 8% in 2023 – indicating that EBAY underperformed the S&P in 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and TM, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, 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 recovery?
Our forecast indicates that eBay’s valuation is $48 per share, which is 26% above the current market price of around $38.
(1) Revenues to marginally beat the consensus
eBay’s revenues grew 3% y-o-y to $5.05 billion in the first six months of FY2023. It was due to a higher take rate, more than offsetting a 4% drop in the GMV. We expect the third-quarter results to be on similar lines. Overall, eBay’s
EBAY
Trefis estimates eBay’s fiscal Q3 2023 net revenues to be around $2.39 billion, 1% above the $2.36 billion consensus estimate.
(2) EPS to top the estimates
eBay Q3 2023 adjusted earnings per share is expected to be $0.97 per Trefis analysis, 3% above the consensus estimate of $0.94. The company’s profit before tax increased from -$2.34 billion to $1.02 billion in the first half of 2023. It was primarily due to a decrease in loss on equity investments & warrants from $3.5 billion to $16 million, partially offset by higher operating expenses. We expect the same trend to continue in Q3. Overall, the company is likely to report a revenue-per-share) of $19.89 in FY2023.
(3) The stock price estimate is 26% above the current market price
We arrive at eBay’s valuation, using a revenue per share estimate of around $19.89 and a P/S multiple of just above 2.4x in fiscal 2023. This translates into a price of $48, which is 26% higher than the current market price.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
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