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EBAY Earnings Preview

by | Apr 24, 2021

eBay (EBAY) reporting earnings on 4/28 after the close with the Street looking for $1.07 on $2.97B in sales. Next quarter is guided to $1.02 and $2.93B while the FY is $4.06 and $11.95B. Shares have closed lower in five of the last seven with an average closing move of 5% and a max move of 9.13%. The current implied move is 5.52%. EBAY has traded well recently and just off of recent highs near $65 with VWAP from the March lows at $60 and key support. A breakout higher would target $70 and a continuation of the bigger monthly breakout. Options flow has been bullish, as well, with buyers last week in the weekly $63 calls and October $65/$60 bull risk reversal. EBAY still has over 8000 May $65 calls in open interest and 10,000 May $70 calls from mid-March. The $41.35B company trades 13.2X earnings, 4X sales, and 11.2X cash with a 1.2% yield. EBAY is poised for a strong quarter with volumes likely continuing to grow behind a hot collectables market and strength in areas like luxury goods and sneakers (the latter was up over 100% Y/Y last quarter). EBAY is also continuing to ramp their managed payments initiatives (over 1M sellers migrated through Q1) as well as advertising which saw a nice rebound in Q1 for promoted listings where they see further opportunity:

“As we look at it, a lot of that growth is being driven by the growth of Promoted Listings. And as we analyze it, we’re seeing better seller penetration of people coming on the platform, better technology and tools in terms of our ability to do relevance, and we’re not seeing it degrade the buyer experience, which is what gives us comfort that when we look at it in total being 1% of our total GMV that we have the opportunity to continue to have advertising growth faster than our GMV on the platform, and really based on that strength of Promoted Listings.”

Analysts have an average target for shares of $67.50 with a Street High $84. Wolfe positive recently citing their initiatives on payments, site experience, and sponsored listings which should help offset the impact of tougher comps in the second half of 2021. Piper positive as well last month noting that the valuation gap should narrow after their sale of Classfieds while eBay’s Managed Payments and Advertising are underappreciated growth products with strong prospects. Short interest is 3%. Hedge fund ownership fell 11% in Q4, Baupost adding 1M shares.

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