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eBay: Maybe The Shutdown Can Inject The Growth It Needs

May 01, 2020 12:09 PM ETeBay Inc. (EBAY) Stock2 Comments
Gary Alexander profile picture
Gary Alexander


  • eBay shares have traded largely flat after reporting strong Q1 beats, with indications that trends have improved in March since the lockdowns began.
  • Year-to-date, eBay's ~10% gains have beaten the overall market, but pales in comparison to Amazon's gains.
  • The question is if higher revenue growth can be sustained once the shutdowns subside. Initial metrics are encouraging.
  • eBay has taken a cautious stance to guidance, maintaining its outlook of flat revenue growth for Q2 and FY20.
  • Upgrading eBay to neutral based on improving performance.

Heading into this year, nothing was going eBay's (NASDAQ:EBAY) way. Growth had stalled as both buyers and sellers drifted to competing platforms, and talks to sell the company's Classifieds division had stalled. But then, the coronavirus struck - and what has become a nightmare for retail businesses has proven a boon to e-commerce players like eBay and Amazon (AMZN).

eBay gave us its first look of how the coronavirus has impacted its business in reporting Q1 results. Despite beating Wall Street's expectations, shares of eBay have traded roughly flat since the announce; and though its year-to-date stock gains of just under 10% have outperformed the broader market, other e-commerce and remote-work stocks have soared much higher.

Data by YCharts

I have long been bearish on eBay, believing it to be dead in the water because of consistently slowing GMV growth and growing irrelevance in the e-commerce space. I acknowledge, however, that the stay-at-home ordinances and the fact that many people have little to do all day outside of online shopping and streaming TV may give eBay a much-needed jolt. The question remains to be seen if eBay can sustain this coronavirus-driven growth injection and grow its brand in the face of steep e-commerce competition - but with shares looking cheap at a ~13x forward P/E based on eBay's updated 2020 pro forma EPS guidance of $3.00-$3.05, I'd say eBay is worth a small gamble.

I'm upgrading my outlook on eBay to neutral; investors should continue to monitor stock movements and fundamental performance as the year progresses.

Q1 download: GMV began improving in March and took off even more in April

The most important update that eBay gave us in Q1 is that performance in its flagship Marketplace business has begun to turn around, thanks to the recent surge in online shopping

This article was written by

Gary Alexander profile picture
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (2)

Again, eBay's business is flat, where other eCommerce companies are showing an increase in sales volume.

Until this company embraces their sellers as partners, not adversaries, and actually invests money into site improvements instead of buybacks, this trend will continue.

The future of this organization will be tested when their Managed Payments program is implemented later this year. They are touting it as a success, but in reality (1) It has been fraught with problems (2) Only 25,000 sellers to date are participating, which is less than 1% (3) Many vendors (especially large sellers) are on record stating that they will leave eBay when this is forced onto them.

As of now, eBay is requesting that their sellers "pre-register" with their bank account and other information to prepare for the transition. Since the company who will administer this program is overseas, most are skittish about doing so. And they should be at least a bit nervous, as eBay itself has been hacked on more than one occasion.

One thing I have noticed as a 20+ year seller, is that, without exception, every time a new program or feature is introduced, there are glitches, and transitions are never smooth. When it involves the financial health and livelihood of those who solely supply eBay with their merchandise, it is crucial that their takeover of payments works correctly when fully launched.
EBay is the world’s largest garage sale! As retailers hit the wall, and the economy struggles to regain it’s footing, EBay’s auction format is best positioned to take advantage of the dispersal of goods (new and used) at cash out prices.
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