eBay shares keep Outperform rating on growth and strategy optimism

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On Thursday, Bernstein maintained its Outperform rating on shares of eBay (NASDAQ: NASDAQ:EBAY), highlighting positive trends and strategic initiatives that are expected to drive the company's growth. The e-commerce giant, currently valued at over $30 billion, has demonstrated strong market performance with a 47.63% year-to-date return.

According to InvestingPro analysis, eBay appears slightly undervalued based on its Fair Value metrics. The analyst pointed to eBay's encouraging 1% foreign exchange-neutral (FxN) gross merchandise volume (GMV) growth in the third quarter and anticipates a modest acceleration to 2% next year, with the potential to reach 3% as the company's Focus Vertical strategy expands across more categories.

The Focus Verticals, which are specific categories eBay has targeted for growth, showed nearly 5% growth in Q3, which is consistent or slightly better than previous quarters. The company maintains impressive gross profit margins of 72%, as reported by InvestingPro, which highlights its operational efficiency.

Moreover, alternative data from Second Measure indicated a potential acceleration in year-over-year growth. The analyst noted that while the fourth quarter could present challenges as eBay is expected to provide a 2025 outlook, any guidance indicating a year-over-year decrease in revenue margin is nuanced.

This expected margin change is attributed to competitive actions in the UK affecting seller fees and a shift in marketplace mix, both of which are anticipated to be temporary setbacks.

Despite potential margin pressures, the analyst expects eBay's EBIT (earnings before interest and taxes) dollars to continue outpacing GMV growth by 2025, which is deemed a more significant indicator of financial health than margins alone.

Trading at a P/E ratio of 15.97, the company maintains a strong financial position. The improvement of EBIT as a percentage of GMV is also forecasted for 2025. The report underscores the belief that growth in GMV and EBIT dollars, along with eBay's capital return strategy, which included $3 billion in buybacks this year and a potential $2 billion or more next year, can create shareholder value.

The outlook is bolstered by the recent sale of Aurelia stock, which has freed up an additional $1 billion towards the end of November. For deeper insights into eBay's financial health and comprehensive analysis, investors can access the full Pro Research Report available on InvestingPro, which covers over 1,400 US equities with expert analysis and actionable intelligence.

In other recent news, eBay has been the subject of several analyst adjustments following its earnings report. Jefferies downgraded eBay's stock rating from "Hold" to "Underperform," citing concerns over the company's core marketplace profitability.

Meanwhile, Truist Securities raised its price target on eBay's shares, citing a positive outlook for the company's Gross Merchandise Volume (GMV) growth. Citi maintained a Buy rating on eBay stock and increased the price target, following eBay's third-quarter results, which revealed a focus on consumer-to-consumer (C2C) sales and artificial intelligence (AI) enhancements.

The company's GMV rose over 1% to $18.3 billion, and revenue increased by more than 3% to $2.58 billion. Piper Sandler also demonstrated optimism for eBay's future by raising its price target to $67.

eBay's management has launched a consumer-to-consumer (C2C) product initiative in the United Kingdom (TADAWUL:4280), projected to contribute positively to the company's revenue by the second half of 2025. These are among the recent developments in eBay's business operations.

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