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On Tuesday, eBay Inc. (NASDAQ:EBAY) received a downgrade in its stock rating from a Jefferies analyst. The e-commerce giant's rating shifted from "Hold" to "Underperform," accompanied by a decrease in the price target from $60.00 to $52.00. The adjustment reflects concerns over eBay's core marketplace profitability and its reliance on certain business segments for revenue.
The analyst highlighted that eBay's core marketplace EBITDA margin, which excludes the effects of its advertising, payments, and headcount reductions, has significantly declined by approximately 1,650 basis points since 2019. This drop has been attributed to increased spending on marketing and product development, which rose by 30% and 60% respectively. Consequently, the adjusted EBITDA for the core marketplace has seen a 50% reduction since 2019, translating to a compound annual growth rate (CAGR) decline of 12% from 2019 to 2024.
The company's gross merchandise volume (GMV) trends have been lackluster, and the situation has been further aggravated by margin contraction. This has led to a substantial decrease in profitability for the core aspect of eBay's business. The analyst expressed a growing concern over eBay's ability to manage growth and profitability, especially considering the recent slowdown in the advertising sector.
The report suggests that eBay's financial health is heavily dependent on its payments and advertising segments. The current trajectory indicates that these areas may not be sufficient to offset the challenges faced by the company's main marketplace business. The downgrade and the lowered price target reflect the analyst's skepticism about eBay's potential to navigate through these headwinds effectively.
Investors and market watchers are now more cautious about eBay's stock, as the new rating and price target suggest that the company may struggle to maintain its previous performance levels in the near future. The lowered expectations for eBay's stock performance come as the company grapples with balancing its growth ambitions with the reality of its financial results.
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