Company Reports

We're increasing our fair value estimate for narrow-moat eBay to $54 from $51 as we better incorporate the impact of the planned sale of its stake in Norwegian Classifieds business Adevinta to a private equity consortium led by Blackstone and Permira. More concretely, we've added an enterprise value adjustment for the roughly 20% stake that eBay will continue to hold in the private company, assuming the deal should close in the second quarter of 2024. We estimate that the value of that stake is now roughly $1.3 billion, or $2.50 per share, and is net of taxes and a 25% discount for lack of liquidity, or DLOL. We'd previously only included those shares which would be monetized at deal closure in our fair value estimate. Still, we now believe that our prior view failed to capture the economic value of that deal to eBay fully. Shares trade in a range we'd consider fairly priced.

We take a postive view of eBay's strategic framework. After divesting a number of noncore segments, its marketplace looks similar to the vibrant platform of the early 2000s, with the firm leaning into its core competency of price discovery for non-new, in-season wares. After unsuccessful forays into fulfillment services and low-value customer segments, the company has prioritized its bread and butter "focus categories," with expansion into authentication services, tuck-in acquisitions, and vertical investments driving healthy growth for eBay's most distinct inventory. Those categories now represent 30% of gross merchandise volume, or GMV, and disproportionately cater to the 16 million high-value "enthusiast" buyers who funnel more than $3,000 in annual spending toward the commerce platform.

We take a postive view of eBay's strategic framework. After divesting a number of noncore segments, its marketplace looks similar to the vibrant platform of the early 2000s, with the firm leaning into its core competency of price discovery for non-new, in-season wares. After unsuccessful forays into fulfillment services and low-value customer segments, the company has prioritized its bread and butter "focus categories," with expansion into authentication services, tuck-in acquisitions, and vertical investments driving healthy growth for eBay's most distinct inventory. Those categories now represent 30% of gross merchandise volume, or GMV, and disproportionately cater to the 16 million high-value "enthusiast" buyers who funnel more than $3,000 in annual spending toward the commerce platform.

We're fans of narrow-moat eBay's focus category and advertising strategies, which appear set to drive gross merchandise volume growth in 2024 after years of macro-driven declines. While our long-term forecasts for 23%-24% operating margin and 4%-5% revenue growth are unchanged, we plan to raise our $49 fair value estimate by a mid-single-digit percentage to reflect quarterly outperformance, time value, and the planned sale of $2 billion of the company's Adevinta stake in 2024. The shares look slightly undervalued even after a rise in aftermarket trading.

Narrow-moat eBay's layoffs don't look likely to alter its strategic course and should prove slightly accretive to our $49 intrinsic valuation. The firm announced its intention to cut 1,000 roles across the organization, or roughly 9% of its workforce, following similar moves by wide-moat Etsy, no-moat Wayfair, and no-moat Macy's. Cost savings weren't quantified and no high-level executive departures were disclosed, but we estimate based on expected severance costs of $90 million-$110 million a savings run-rate of about $200 million per year—or roughly 2% of our projected net sales for 2024. That rests on the company's official severance guidelines of 50% of salary, 50% of bonus, and 6 times (health) premium payments as disclosed in the firm's most recent annual filing for non-C-suite- and senior vice president-level employees. Shares initially popped on the news but have since given up most of their gains, yet continue to look attractive at current prices.

After divesting a number of noncore segments, eBay's marketplace looks similar to the vibrant platform of the early 2000s, with the firm leaning into its core competency of price discovery for non-new, in-season wares. The strategic pivot strikes us as a competitive necessity, with unsuccessful forays into logistics and first-party inventory and auxiliary services seeing the bulk of business-to-consumer, or B2C, sales migrate toward larger peers with sprawling store footprints, scaled fulfillment networks, or extensive buyer and seller features. Nonetheless, the core business should have plenty of room to run, considering management's estimated $500 billion total addressable market for non-new, seasoned goods, which comprise 90% of platform gross merchandise volume, or GMV. We expect further benefit from swelling interest in resale markets and a broader rollout of the firm's focused category approach—with the operator targeting 50% of GMV, in those categories by 2025. The focus categories, including luxury handbags and watches, jewelry, collectibles, high-value sneakers, and now auto parts and accessories and streetwear, continue to outgrow the legacy marketplace by a substantial clip, driving a modest but discernable inflection point in U.S. GMV growth and stymieing what would otherwise be a protracted but inevitable decline.

Narrow-moat eBay posted solid third-quarter earnings, but soft guidance and margin pressure sent shares down 6%-7% in aftermarket trading. We think that the reaction is directionally correct but overblown, and expect to lower our $51 intrinsic valuation by a mid-single-digit percentage after digesting results.

After divesting a number of noncore segments, eBay's marketplace looks similar to the vibrant platform of the early 2000s, with the firm leaning into its core competency of price discovery for non-new, in-season wares. The strategic pivot strikes us as a competitive necessity, with unsuccessful forays into logistics and first-party inventory and auxiliary services seeing the bulk of business-to-consumer, or B2C, sales migrate toward larger peers with sprawling store footprints, scaled fulfillment networks, or extensive buyer and seller features. Nonetheless, the core business should have plenty of room to run, considering management's estimated $500 billion total addressable market for non-new, seasoned goods, which comprise 90% of platform gross merchandise volume, or GMV. We expect further benefit from swelling interest in resale markets and a broader rollout of the firm's focused category approach—with the operator targeting 50% of gross merchandise volume, or GMV, in those categories by 2025. The focus categories, including luxury handbags and watches, jewelry, collectibles, high-value sneakers, and now auto parts and accessories and streetwear, continue to outgrow the legacy marketplace by a substantial clip, driving a modest but discernable inflection point in U.S. GMV growth, and stymieing what would otherwise be a protracted but inevitable decline.

After divesting a number of noncore segments, eBay's marketplace looks similar to the vibrant platform of the early 2000s, with the firm leaning into its core competency of price discovery for non-new, in-season wares. The strategic pivot strikes us as a competitive necessity, with unsuccessful forays into logistics and first-party inventory and auxiliary services seeing the bulk of business-to-consumer, or B2C, sales migrate toward larger peers with sprawling store footprints, scaled fulfillment networks, or extensive buyer and seller features. Nonetheless, the core business should have plenty of room to run, considering management's estimated $500 billion total addressable market for non-new, seasoned goods, which comprise 90% of platform gross merchandise volume, or GMV. We expect further benefit from swelling interest in resale markets and a broader rollout of the firm's focused category approach—with the operator targeting 50% of gross merchandise volume, or GMV, in those categories by 2025. The focus categories, including luxury handbags and watches, jewelry, collectibles, high-value sneakers, and now auto parts and accessories and streetwear, continue to outgrow the legacy marketplace by a substantial clip, driving a modest but discernable inflection point in U.S. GMV growth, and stymieing what would otherwise be a protracted but inevitable decline.

After divesting a number of noncore segments, eBay's marketplace looks similar to the vibrant platform of the early 2000s, with the firm leaning into its core competency of price discovery for non-new, in-season wares. The strategic pivot strikes us as a competitive necessity, with unsuccessful forays into logistics and first-party inventory and auxiliary services seeing the bulk of business-to-consumer, or B2C, sales migrate toward larger peers with sprawling store footprints, scaled fulfillment networks, or extensive buyer and seller features. Nonetheless, the core business should have plenty of room to run, considering management's estimated $500 billion total addressable market for non-new, seasoned goods, which comprise 90% of platform gross merchandise volume, or GMV. We expect further benefit from swelling interest in resale markets and a broader rollout of the firm's focused category approach—with the operator targeting 50% of gross merchandise volume, or GMV, in those categories by 2025. The focus categories, including luxury handbags and watches, jewelry, collectibles, high-value sneakers, and now auto parts and accessories and streetwear, continue to outgrow the legacy marketplace by a substantial clip, driving a modest but discernable inflection point in U.S. GMV growth, and stymieing what would otherwise be a protracted but inevitable decline.

Narrow-moat eBay reported mixed earnings, with sticky margin pressure outweighing otherwise strong second-quarter results. While we take a positive view of the firm's long-term emphasis on focus categories (which outgrew the remainder of the marketplace by 7 points) and a swelling advertising platform (which grew 35% annually to 2% of gross merchandise volume, or GMV), we now expect margin pressure to bleed through 2024 as the firm invests in international shipping and digests a slew of recent acquisitions. More concretely, we no longer expect the online marketplace operator to return to prepandemic profitability until 2025, driving our anticipated mid-single-digit percentage haircut to our $54 fair value estimate. Shares continue to trade at about a 10% discount to our revised intrinsic valuation after the market's reaction (of similar magnitude) following the release.

We don't foresee any changes to our $54 fair value estimate or to our Standard Morningstar Capital Allocation Rating for narrow-moat eBay after the firm announced a planned tuck-in acquisition of Certilogo on May 17. The deal is expected to close in the third quarter of 2023 for an undisclosed sum, but with PitchBook data suggesting that Certilogo generated just $5.6 million in 2021 sales (the most recent year available), we don't expect the deal to prove financially material.

After divesting a number of noncore segments, eBay's marketplace looks similar to the vibrant platform of the early 2000's, with the firm leaning into its core competency of price discovery for non-new, in-season wares. The strategic pivot strikes us as a competitive necessity, with unsuccessful forays into logistics and first-party inventory and auxiliary services seeing the bulk of business-to-consumer, or B2C, sales migrate toward larger peers with sprawling store footprints, scaled fulfillment networks, or extensive buyer and seller features. Nonetheless, the core business should have plenty of room to run, considering management's estimated $500 billion total addressable market for non-new, seasoned goods (which comprise 90% of platform gross merchandise volume, or GMV, and could benefit from swelling interest in resale markets and a broader rollout of the firm's focused category approach—with the operator targeting 50% of gross merchandise volume, or GMV, in those categories by 2025. The focus categories, including luxury handbags and watches, jewelry, collectibles, high-value sneakers, and now auto parts and accessories, continue to outgrow the legacy marketplace by a substantial clip, driving a modest but discernable inflection point in U.S. GMV growth, and stymieing what would otherwise be a protracted but inevitable decline, in our view.

Narrow-moat eBay reported solid quarterly earnings, with $2.5 billion in sales and $1.11 in non-GAAP EPS aligning with our top-line forecast ($2.5 billion), but healthily edging our $0.96 EPS estimate. The firm's focused category investments continue to bear fruit, with the operator's large parts and accessories business achieving e-commerce market growth rates more quickly than expected, helping to drive eight points of outperformance between focused categories and the rest of the marketplace. Despite the quarterly strength, we expect to lower our $57 fair value estimate by a mid-single-digit percentage, with higher interest rates and softening retail sales likely to affect some of the more discretionary verticals on the eBay platform like consumer electronics and home and garden. This view is consistent with Morningstar's forecasts for slowing growth in real U.S. consumption expenditures, which we pencil in at just 1.8% and 1.4% in 2023 and 2024, respectively. Shares look attractive, trading at a 17%-18% discount to our revised intrinsic valuation even after a small pop (3%) in afterhours trading.

After divesting a number of noncore business units, eBay's marketplace looks strikingly similar to the vibrant platform of the early 2000's, with the firm leaning into its core competency of price discovery for non-new, in-season wares. The strategic pivot strikes us as a competitive necessity, with unsuccessful forays into logistics and first-party inventory and auxiliary services seeing the bulk of business-to-consumer, or B2C, sales migrate toward larger peers with sprawling store footprints, scaled fulfillment networks, or extensive buyer and seller features. Nonetheless, the core business should have plenty of room to run, considering management's estimated $500 billion total addressable market for non-new, seasoned goods (which comprise 90% of platform gross merchandise volume, or GMV, and could benefit from swelling interest in resale markets and a broader rollout of the firm's focused category approach (targeting 50% of gross merchandise volume, or GMV, in those categories by 2025). The focus categories—luxury handbags and watches, jewelry, collectibles, high-value sneakers, and now auto parts and accessories—continue to outgrow the legacy marketplace by a substantial clip, driving a modest but discernable inflection point in U.S. GMV growth, and stymieing what would otherwise be a protracted but inevitable decline, in our view.

Narrow-moat eBay posted solid fourth-quarter results, with $2.51 billion in sales and $1.07 in adjusted EPS edging our $2.45 billion and $1.03 estimates, respectively, but saw guided margin pressure guidance send its shares down 5%-6% in afterhours trading. We view the market's reaction as appropriate and expect to lower our own $60 fair value estimate by a mid-single-digit percentage as we digest results.

With divestitures of Stubhub, eBay Classifieds, and eBay Korea largely in the rearview mirror, narrow-moat eBay's business looks remarkably similar to its genesis: a lively e-commerce platform connecting hundreds of millions of buyers and sellers worldwide, with an emphasis on used, liquidation, and refurbished goods. The firm's strategic pivot strikes us as a competitive necessity, with unsuccessful forays into logistics and first-party inventory, and auxiliary services seeing the bulk of business-to-consumer, or B2C, sales migrate toward larger peers with sprawling store footprints, scaled fulfillment networks, or extensive buyer and seller features. Nonetheless, the core eBay Marketplace business should have plenty of room to run, considering management's estimated $500 billion total addressable market for non-new, seasoned goods (which comprise 90% of platform GMV), and could benefit from swelling interest in resale markets and a broader rollout of the firm's focused category approach (targeting 50% of gross merchandise volume, or GMV, in those categories by 2025).

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.

With divestitures of Stubhub, eBay Classifieds, and Gmart largely in the rearview mirror, narrow-moat eBay's business looks remarkably similar to its genesis: a lively e-commerce platform connecting hundreds of millions of buyers and sellers worldwide, with an emphasis on used, liquidation, and refurbished goods. The firm's strategic pivot strikes us as a competitive necessity, with unsuccessful forays into logistics and first-party inventory, and auxiliary services seeing the bulk of business-to-consumer, or B2C, sales migrate toward larger peers with sprawling store footprints, scaled fulfillment networks, or extensive buyer and seller features. Nonetheless, the core eBay Marketplace business should have plenty of room to run, considering management's estimated $500 billion total addressable market for non-new, seasoned goods, and could benefit from swelling interest in resale markets and a broader rollout of the firm's focused category approach (targeting 50% of gross merchandise volume, or GMV, in those categories by 2025).

Narrow-moat eBay announced its second acquisition in two days, agreeing to purchase myFitment, an online tool that helps ensure product specification alignment for buyers and sellers in the parts and accessories category. The move strikes us as strategically cogent. Although the purchase price was not disclosed, we expect the deal should be comfortably funded with cash and quite a bit smaller than $300 million TCGplayer acquisition announced Aug. 22. In our view, myFitment could directly address what we view as one of two large pain points in expanding e-commerce adoption of auto parts and accessories: bolstering confidence that an order will appropriately meet the customer's needs and fit their vehicle make/model. (Addressing time sensitivity remains a second key pain point to broader adoption.) We maintain our $63 fair value estimate and Standard capital allocation rating for eBay.