EBay Outperforms Market Expectations, but Cautious Commentary Drives Modest FVE Cut; Shares Cheap

Narrow-moat eBay reported better-than-expected third-quarter results, with $2.38 billion in sales and $1.00 in non-GAAP EPS edging our $2.34 billion and $0.92 estimates, respectively. Amid a quarter in which e-commerce competitors have had lingering pressure, it was refreshing to see eBay's consolidated gross merchandise volume growth hold approximately steady at 2.5% growth—down just 20 basis points from the second quarter—relative to a precoronavirus (2019) base line. In our view, the marketplace's resilience is principally attributable to prudent investments made during CEO Jaime Iannone's tenure and an auspicious product mix that skews toward products, which compete effectively along the lines of perceived value, like used and refurbished goods (33% of platform sales). While we intend to shave our $63 fair value estimate by a mid-single-digit percentage, the move predominately reflects our view that pressure from rising interest rates and stubborn inflation is now likely to drag through the next four to six quarters, pinching 2023 consumption spending (we now anticipate a 5.5% contraction in consolidated GMV, down from low-single-digit growth previously), rather than any idiosyncratic missteps.