eBay has all the characteristics of a value stock. Low growth, inexpensive pricing (around 10x this year's non-GAAP EPS), stock repurchase programme, and dividend yield of over 2%. However, despite the name appearing to be superficially inexpensive, I'm not sure it has much real worth. The fact that the bull thesis has anaemic growth rates is, in my opinion, its worst flaw. And I wonder if eBay can be counted on to grow at a rate of 5% CAGR in 2019, as it recently reported in Q2 2023.
For the future of internet retail, eBay has enormous plans. They seek to enhance the personalization and uniqueness of online buying and selling, particularly for those customers who are truly devoted to a particular brand or hobby. To achieve this, they focus on three key objectives: making sure your shopping experience is perfect, coming up with fresh ideas on how to make life simpler and better for everyone, and utilising cutting-edge technology to make buying and selling more enjoyable and effective.
eBay is also making use of AI to assist with this. They want to know what you enjoy so they can show you things that are compatible with those tastes. They are updating their website to make it more user-friendly and customised.
With its sluggish growth, relatively low valuation, share repurchases, and 2% dividend yield, eBay seems to fulfil the definition of a value stock, the real value that it provides is unclear. The primary issue is its slow growth rates, and I have my doubts that it will be able to meet the 5% CAGR it previously predicted for Q2 2023. Although the consistency of revenue growth rates is encouraging, comparables won't be as good in 2024. Its customer adoption curve also appears to be steadily falling, which calls into doubt if the story really reflects reality.
A change in eBay's capital return policy is evident from the current slowdown in share repurchases compared to 2022, despite the company's commitment to returning funds to shareholders. Furthermore, eBay's capacity to be more aggressive with share repurchases might be constrained by its about $2 billion in net debt. I'm hesitant about the prospects for eBay's future because of all this uncertainty. But I'll be honest: I'm intrigued by eBay's expanding prospects enough to keep it on my watch list.
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