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Citi bullish on eBay stock as focus category strategy and UK expansion bear fruit

EditorEmilio Ghigini
Published 01/11/2024, 07:36
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EBAY
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On Thursday, Citi maintained a Buy rating on eBay (NASDAQ:EBAY) stock and increased the price target to $68 from $65. The adjustment follows eBay's third-quarter results, which surpassed expectations. However, the company's fourth-quarter guidance was mixed, primarily due to a strategic investment in the UK.

This investment is expected to affect revenue and take rate in the short term but should stabilize by early 2025. Citi believes the investment could ultimately contribute positively to eBay's Gross Merchandise Volume (GMV) and revenue.

eBay's focus on C2C commerce in the UK represents a strategic move by management to enhance the platform, particularly in Focus Categories and areas where eBay has unique strengths. According to Citi, these efforts are starting to pay off. The company reported a 5% increase in GMV for Focus Categories, and overall GMV is showing signs of consistent growth, albeit at a low single-digit rate.

Despite the impact on margins from the UK investment, eBay's management is targeting a balance between growth and profitability that maximizes operating income margin dollars. Citi's analyst highlighted the positive trajectory of eBay's initial outlook for 2025, which anticipates continued growth.

The analyst also noted eBay's commitment to shareholder returns, as evidenced by increased buybacks. The combination of eBay's early positive results from its strategic initiatives and its shareholder-friendly actions underpins Citi's decision to maintain a Buy rating on the company's stock.

In other recent news, eBay's Gross Merchandise Volume (GMV) has shown growth this quarter, a trend expected to continue into 2025, as highlighted by Piper Sandler and Barclays (LON:BARC) analysts. Both firms adjusted their stock price targets for eBay, with Piper Sandler raising it to $67 and Barclays trimming it to $64. eBay's Q3 financial results revealed a focus on consumer-to-consumer (C2C) sales and artificial intelligence (AI) enhancements, with GMV rising over 1% to $18.3 billion and revenue increasing by more than 3% to $2.58 billion.

In addition, eBay has initiated a C2C product venture in the United Kingdom, projected to contribute positively to the company's revenue, particularly in the second half of 2025. eBay's Q4 projections anticipate a GMV between $18.9 billion and $19.3 billion, and revenue estimates ranging from $2.53 billion to $2.59 billion. Non-GAAP EPS for Q4 is expected to be between $1.17 and $1.22, indicating a year-over-year growth of 9% to 14%.

The company also plans to raise its share repurchase target to $3 billion for 2024, reflecting its commitment to shareholder returns. These recent developments highlight eBay's ongoing strategies and potential for future growth, as well as the analysts' confidence in the company's performance.

InvestingPro Insights

eBay's strategic moves and financial performance, as highlighted in the article, are further supported by recent data from InvestingPro. The company's market cap stands at $27.95 billion, reflecting its significant presence in the e-commerce sector. eBay's impressive gross profit margin of 72.03% for the last twelve months as of Q2 2024 aligns with one of the InvestingPro Tips, which notes the company's "impressive gross profit margins." This high margin suggests efficient cost management and strong pricing power in its focus categories.

Another InvestingPro Tip points out that eBay "has raised its dividend for 5 consecutive years," which is consistent with the company's commitment to shareholder returns mentioned in the article. The current dividend yield of 1.72% adds to the appeal for income-focused investors. Moreover, eBay's strong performance is evident in its 63.07% price total return over the past year, supporting the InvestingPro Tip that highlights the "high return over the last year."

For investors seeking more comprehensive analysis, InvestingPro offers 10 additional tips for eBay, providing a deeper understanding of the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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