Entering text into the input field will update the search result below

eBay: A Noteworthy Reversal Higher

May 07, 2020 9:42 AM ETeBay Inc. (EBAY) Stock11 Comments
Paul Franke profile picture
Paul Franke


  • eBay's reorganization is translating into better operating performance.
  • The company's e-commerce resale and new retail sales business model has greater value during the coronavirus pandemic.
  • Wall Street may reprice ownership valuations much higher over time, especially if underlying sales trends improve.

eBay Inc. (NASDAQ:EBAY) is primed for better organic growth after a number of years of stagnation. Several large activist investors have encouraged the company to refocus on its core e-commerce website, divesting other businesses purchased and developed over the years with its huge cash flow generation. My bullish take on the company is based on the coronavirus pandemic increasing eyeballs and sales, at the same time as margins/returns from the original business are improving. Wall Street will likely decide to place much higher valuation multiples on the remaining blue-chip technology, profit machine.

eBay is a global e-commerce leader, with two divisions - Marketplace and Classifieds matching millions of buyers and sellers around the planet. The company uses online technologies and services to give buyers a choice of inventory from sellers worldwide, virtually anytime and anywhere. Marketplace includes the company's main operating business at ebay.com, plus localized counterparts and the eBay suite of mobile apps. Classifieds includes brands such as mobile.de, Kijiji, Gumtree, Marktplaats, eBay Kleinanzeigen and others.

Image Source: www.ebay.com

On February 13th, eBay completed the previously announced sale of its StubHub business to an affiliate of viagogo for $4 billion. The company used proceeds to buy back stock and repay debt. In addition, the Classifieds unit is up for sale, with negotiations ongoing. Expected sales proceeds are in the $8-10 billion range. After this final divestiture, eBay will be left with its original operating business. Large hedge fund investors are hoping a renewed focus on the eBay platform will produce organic growth at improved margins, and an even higher Wall Street valuation of the remaining business.

In March, activist firm Starboard Value nominated four candidates to the board of directors to add pressure in the search for a new like-minded CEO. In the end, this effort was dropped with the hiring

This article was written by

Paul Franke profile picture
Nationally ranked stock picker for 30 years. Victory Formation and Bottom Fishing Club quant-sort pioneer.....Paul Franke is a private investor and speculator with 37 years of trading experience. Mr. Franke was Editor and Publisher of the Maverick Investor® newsletter during the 1990s, widely quoted by CNBC®, Barron’s®, the Washington Post® and Investor’s Business Daily®. Paul was consistently ranked among top investment advisors nationally for stock market and commodity macro views by Timer Digest® during the 1990s. Mr. Franke was ranked #1 in the Motley Fool® CAPS stock picking contest during parts of 2008 and 2009, out of 60,000+ portfolios. Mr. Franke was Director of Research at Quantemonics Investing® from 2010-13, running several model portfolios on the Covestor.com mirror platform (including the least volatile, lowest beta, fully-invested equity portfolio on the site). As of April 2023, he was ranked in the Top 5% of bloggers by TipRanks® for stock picking performance on positions held one year. A contrarian stock picking style, along with daily algorithm analysis of fundamental and technical data have been developed into a system for finding stocks, named the “Victory Formation.” Supply/demand imbalances signaled by specific stock price and volume movements are a critical part of this formula for success. Mr. Franke suggests investors use 10% or 20% stop-loss levels on individual choices and a diversified approach of owning at least 50 well positioned favorites to achieve regular stock market outperformance. The short sale of securities in overvalued, weak momentum stocks as pair trades and hedges is also a part of the Victory Formation long/short portfolio design. "Bottom Fishing Club" articles focus on deep-value candidates or stocks experiencing a major reversal in technical momentum to the upside. "Volume Breakout Report" articles discuss positive trend changes backed by strong price and volume trading action.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in EBAY over 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.

This writing is for informational purposes only. All opinions expressed herein are not investment recommendations, and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisor capacity and is not a registered investment advisor. The author recommends investors consult a qualified investment advisor before making any trade. This article is not an investment research report, but an opinion written at a point in time. The author's opinions expressed herein address only a small cross-section of data related to an investment in securities mentioned. Any analysis presented is based on incomplete information, and is limited in scope and accuracy. The information and data in this article are obtained from sources believed to be reliable, but their accuracy and completeness are not guaranteed. Any and all opinions, estimates, and conclusions are based on the author's best judgment at the time of publication, and are subject to change without notice. Past performance is no guarantee of future returns.

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.

Recommended For You

Comments (11)

WOW, just wow.

$50-60 share for a company that owns nothing, does nothing and is just a glorified website? WOW.

eBays 24/7/365 war against its sellers is why it reported a negative %8 growth quarter and its ONLY its (rip off) Promoted Listings program and Managed Payments (another rip off) that keeps eBay going.

Yes Covid-19 was a blessing for eBay since people are stuck in their homes and needed items PLUS Amazon was overwhelmed - but 1 offs arent company growth.

The new CEO will be of no help as his only goal (despite the bravado and public statements) is just to take money where ever it can find it and stuff it into stock buy backs and golden parachutes for BOD members.

Neither the sales of Stubhub or Classifieds will do anything for any seller - as eBay has already decided that they money is better used elsewhere - most probably restocking Walkers West's booze cabinets.

They could start of course by bringing CS in house in the USA and not overseas - but maybe that is even asking too much of the San Jose mafia.

eBays stock isnt worth more then $25 a share unless and until it puts for a platform for growth thats based on how it grows Marketplace Sales (by real numbers not fake new account numbers) NOT on MP or PM.
Paul Franke profile picture
What if the new CEO plans on changing the company in the near future to meet your demands? What if the company refocuses on attracting new sellers and buyers with lower fees?

The whole point of the divestitures is to restart long-term growth at eBay.
You are basing your assumptions on what if.
Any investor that follows that rule is doomed to be making huge losses.
Shangrila Value profile picture
Be sure, @Paul Franke , they won't reduce a cent from their fees.
rwww05 profile picture
My price target is $100 within the next 12 - 18 months.
One thing which will affect eBay in a huge way in the future is when the "e-packet" program is eliminated. The Obama administration sold the United States Post Office down the river with this lousy agreement. Chinese and other Asian sellers can ship merchandise halfway around the world for less than $1, and the USPS is losing money on every one of these packages.

Meanwhile, American sellers cannot ship a parcel anywhere for less than $2.70 locally, and $3.18 cross-country. This is keeping eBay in business at the moment, since Asian vendors can offer their cheap trinkets for much less than their American counterparts. The Trump administration was very close to rescinding this program last year, but a last-minute extension was granted.

With the USPS stating that they may be out of business soon, this class of mail will soon be obsolete. And Americans will no longer purchase from overseas sellers if the true mailing costs are charged. This will accomplish two important tasks: (1) It will place much needed funds into the coffers of the Postal Service, and (2) American buyers will purchase their goods from American sellers. Asian vendors will no longer be able to compete on price, essentially tipping the advantage back into the hands of businesses in the USA.

Trump has been on record many times stating that Amazon is not paying enough for mailing, and that this has caused the revenue problems at the USPS. If they are indeed receiving special rates, this is a drop in the bucket compared to the actual losses incurred from e-packets.
nobody trusting china stuff and waiting 1 month for there junk. ebay going much higher. ultimate pawn shop.
Shangrila Value profile picture
@gamesetmatch But that's what eBay sells. Cheap china stuff...
i am talking about the ebay sellers from china. not sure how much of there business is that. i am comparing brick and mortar vs 14-15 pe for ebay seems very reasonable in this environment.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About EBAY

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on EBAY

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.