Categories Analysis, Consumer

eBay Stock: Why it’s a good idea to keep EBAY on your watchlist

The stock declined this week after eBay posted mixed second-quarter results, but recovered soon

eBay Inc. (NASDAQ: EBAY) appears to be shedding its laggard image and catching up with competitors like Amazon (AMZN) and Walmart (WMT). The online marketplace has emerged as a pandemic winner by leveraging the online shopping boom during the crisis, while dealing with supply chain issues effectively.

Stock Dips

Continuing the recent slowdown, eBay’s stock dropped Wednesday evening after the company posted mixed second-quarter results, but recovered in the following session. The stock has been jittery after hitting a record high last month. It is estimated that the sales boom would continue in the second half and beyond, but the tailwinds have already been factored into the stock. The latest target price indicates a modest growth, suggesting that a watch-and-wait strategy would pay off as far as investing is concerned. Those willing to take risks can still go for it.


Read management/analysts’ comments on eBay’s Q2 earnings

We are placing more AI-powered recommendations for pricing and keyword bidding into the Seller Hub to help sellers drive particular volumes. Finally, we’re beginning to syndicate ads off eBay platforms to drive more buyers to listings. Importantly, sellers maintain control of pricing and visibility while benefiting from the scaled marketing capabilities of eBay. In addition to Advertising and Payments, we’re driving a number of other site-wide initiatives.

Jamie Iannone, chief executive officer of eBay

eBay Q2 2021 earnings infographic

Transformation

Of late, the Silicon Valley-based e-commerce platform’s focus has been on striking a balance between its online platform and physical stores. When Jamie Iannone became the CEO last year, he had a tough task at hand – to drive growth in extremely unfavorable market conditions. While Iannone seems to have passed the initial test, there is uncertainty as to whether the current momentum would be sustained post-COVID. Meanwhile, his campaign for a ‘tech-led re-imagination should enhance customer experience by making the platform more user-friendly.  

But those initiatives would demand heavy investment and that would put pressure on margins in the near term. Also, some experts believe that customers would return to their old shopping habits once markets reopen. The virus-driven shopping spree created a unique opportunity to lay the groundwork for long-term growth, but it is not known whether eBay executives have made use of it. It needs to be seen if the company would be able to match the growth story of one-time subsidiary PayPal (PYPL) that outshined it after the spinoff.

Virus-driven Growth

At $0.99 per share, eBay’s adjusted earnings were flat in the quarter ended June 2021. Both the operating segments registered double-digit growth, lifting revenues to $2.7 billion. The top-line missed analysts’ forecast and earnings beat.


Retail: Digital growth remains strong even as restrictions ease


eBay’s shares have been on an upward spiral since early last year, gaining about 21% in the past twelve months. They outperformed the broad market quite often and stayed above the long-term average. The stock traded slightly lower on Thursday, continuing the post-earnings slump.

 

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