Shares of eBay EBAY have skyrocketed 42% so far this year to outpace its industry’s 21% average climb and e-commerce rival Amazon’s AMZN 32% jump. EBay’s success comes as it tries to establish itself as much more than an online auction market as everyone from Walmart WMT to Target TGT bolster their digital offerings.
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EBay is coming off a better-than-projected first quarter of 2019 that helped it raise its full-year earnings and revenue guidance. Despite some of the recent positivity, activist investors Elliott Management and Starboard Value LP have pushed the e-commerce firm to move on from its online ticket marketplace StubHub and its portfolio of Classifieds properties. The company added two new directors to its board in March as it began an “operating review and the commencement of a strategic review of the company’s portfolio of assets.”
The activist push to have eBay focus on its core marketplace business stems from the firm’s inability to expand as quickly as many of its rivals. Today, eBay does sell many more new offerings at fixed prices and boats 180 million active buyers worldwide, up from 171 million in the year-ago period. The company also announced last year that it will phase out PayPal PYPL, which it spun off in 2015, as its back-end payments service.
The San Jose, California-based company has revamped its website and focused on more name-brand offerings in a larger marketing push to try to rebrand itself in a booming e-commerce age. The firm’s app has been downloaded 459 million times. And it recently announced three weeks of deals in July 2019 in an effort to stand out against Amazon’s widely-popular Prime Day.
EBay has also expanded its advertising business in recent years. Roughly 800,000 sellers utilized eBay’s promoted listings last quarter. This helped drive over $65 million of revenue in Q1, which marked a roughly 110% climb from Q1 2018. “As we’ve mentioned previously, as this business scales, we’re reducing third-party ads, which are not accretive to our ecosystem,” CEO Devin Wenig said on eBay’s Q1 conference call. “We’re very pleased with our progress and remain on track toward a $1 billion advertising revenue opportunity.”
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EBay stock closed regular trading Tuesday up 1.01% at $39.94 per share, right below its 52-week intraday highs of $40.55. Before we move on, it is worth noting that despite all of the recent positivity, shares eBay have barely topped its industry’s average over the last three years.
Looking ahead, our current Zacks Consensus Estimate calls for the company’s Q2 revenue to climb 1.3% to $2.67 billion. Last quarter, eBay’s revenue jumped 2% and 4% on a foreign exchange neutral basis. At the bottom end of the income statement, eBay is projected to see its adjusted earnings jump 17% to $0.62 per share. This would mark a slowdown compared to last quarter’s 26% bottom-line expansion. With that said, the company topped our quarterly estimate by 6.5% last quarter and 23.5% in Q4 2018.
EBay’s Q2 earnings estimate has also remained at its current $0.62 per share projection over the last 60 days, which means analysts on average have turned neither more bullish or bearish.
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EBay is currently a Zacks Rank #3 (Hold) that sports a “B” grade for Value and an “A” for Momentum in our Style Scores system. The firm is currently trading at 17.5X forward 12-month Zacks earnings estimates. This represents a massive discount compared to its industry’s 40.3X average, as well as its own three-year high of 25.4X and 18.7X median.
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