eBay (NASDAQ: EBAY) is set to announce its financial outcomes for Q1 2024 on Wednesday, May 1st. The upcoming report is projected to reveal a mixed bag of results, with revenues surpassing expectations while earnings may fall short. In the last quarter, the company exceeded street estimates, witnessing a 2% year-over-year increase in net revenues, reaching $2.6 billion. This progress was fueled by a 33% surge in first-party advertising product revenues and a 2% rise in gross merchandise value (GMV). However, a slight dip in active buyers had a slight adverse impact on the top line, a trend that might persist in Q1.
Stagnant Performance Amid Dynamic Markets
In the backdrop of the current financial climate, the value of EBAY stock has remained relatively static, hovering around $50 since early January 2021, barely moving in contrast to the impressive 35% rise of the S&P 500 over that same period. Notably, EBAY’s stock performance compared to the index has been lackluster, with 32% returns in 2021, a significant -38% downturn in 2022, and a modest 5% gain in 2023, trailing behind the S&P 500’s performance. The challenges of consistently outperforming the S&P 500 in recent years have been daunting for individual stock, including heavyweight players in the Consumer Discretionary sector like AMZN, TSLA, and TM, as well as tech giants such as GOOG, MSFT, and AAPL.
Conversely, the Trefis High-Quality Portfolio, consisting of 30 stocks, has excelled in outperforming the S&P 500 across the same timeframe every year. The question arises: why do some stocks outstrip the benchmark while others struggle? Amidst the current economic uncertainties marked by soaring oil prices and escalated interest rates, the looming question remains – will eBay repeat its underperformance trend from 2022 and 2023, failing to match the S&P 500 over the coming year, or will it make significant strides forward?
Our analysis predicts eBay’s valuation to be $49 per share, indicating a 5% decrease from the current market price of around $51.
Insights into Q1 Fiscal Expectations
eBay witnessed a 3% year-over-year revenue growth in FY2023, totaling $10.1 billion. This increase was due to a higher net revenues divided by GMV ratio, offset slightly by a 1% decline in GMV. Despite this, GMV showed signs of recovery in the last quarter, with this positive momentum anticipated to persist in Q1. Projections suggest eBay’s revenues could touch $10.2 billion in FY2024. Trefis estimates eBay’s Q1 2024 net revenues to hover around $2.45 billion, 3% above the consensus estimate of $2.37 billion.
eBay’s adjusted earnings per share (EPS) for Q1 2024 are expected to settle at $1.11, a deviation of 2% from the $1.13 consensus estimate. The company’s net income improved from -$1.27 billion to $2.77 billion in FY 2023, driven by a significant rise in gain on equity investments and marginally offset by higher operating expenses as a percentage of revenues. The outlook for the company indicates an anticipated revenue-per-share (RPS) of $20.26 in FY2024.
Valuation and Market Comparison
Through a revenue per share (RPS) estimate of around $20.26 and a P/S multiple of 2.4x in fiscal 2024, our valuation model implies a price of $49, a 5% reduction from the current market price.
| Returns | Apr 2024 MTD [1] | 2024 YTD [1] | 2017-24 Total [2] |
| EBAY Return | -3% | 17% | 72% |
| S&P 500 Return | -3% | 6% | 127% |
| Trefis Reinforced Value Portfolio | -6% | 1% | 615% |
[1] Returns as of 4/25/2024
[2] Cumulative total returns since the end of 2016
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