Fragmented Fulfillment And Regulatory Scrutiny Will Undermine Online Retail

Key Takeaways

• Migration of sellers to direct platforms and demand for faster shipping threaten eBay's market relevance, margins, and long-term revenue growth.
  
• Lagging technology, weak brand appeal to younger users, and rising compliance burdens risk eroding user base, repeat sales, and platform profitability.
  
• eBay's strategic focus on recommerce, advanced AI tools, and international expansion positions it for resilient growth and margin improvement amid evolving consumer trends.

Catalysts

Operates marketplace platforms that connect buyers and sellers in the United States, the United Kingdom, China, Germany, and internationally.

• The accelerating shift by brands and retailers toward direct-to-consumer and owned-channel platforms is likely to further erode eBay's long-term relevance and transaction volume, threatening both revenue growth and gross merchandise volume as more third-party sellers migrate away from global marketplaces.
  
• Intensifying consumer demand for rapid, reliable, and low-friction delivery—such as same-day shipping—favours logistics-focused and vertically integrated platforms over marketplace models like eBay's, which rely on fragmented individual seller fulfillment, leading to a potential loss of market share and pressure on net margins due to higher necessary investments in logistics or incentives.
  
• Ongoing investment gaps in technology and automation compared to scale players like Amazon and Alibaba leave eBay increasingly vulnerable to deteriorating buyer and seller experience, diminished platform stickiness, and ultimately weaker repeat purchase rates that limit long-term revenue and earnings expansion.
  
• Demographic headwinds tied to eBay’s aging user base and limited brand refresh undermine its ability to attract and retain Gen Z and millennial buyers, raising the risk of sustained engagement decline and stagnating gross merchandise volume—further aggravating revenue and earning challenges over the coming years.
  
• The continued global trend of regulatory scrutiny—ranging from antitrust enforcement to increased privacy and consumer protection requirements—raises compliance costs for multiline online retail, disproportionately impacting eBay’s net margins compared with larger omnichannel competitors who can better absorb these expenses.

eBay Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on eBay compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming eBay's revenue will grow by 1.6% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 19.9% today to 17.8% in 3 years time.
• The bearish analysts expect earnings to reach $1.9 billion (and earnings per share of $3.98) by about July 2028, down from $2.0 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 12.8x on those 2028 earnings, down from 18.4x today. This future PE is lower than the current PE for the US Multiline Retail industry at 15.8x.
• Analysts expect the number of shares outstanding to decline by 5.73% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.34%, as per the Simply Wall St company report.

eBay Future Earnings Per Share Growth

Risks

• eBay’s focus on recommerce, luxury, collectibles, and pre-loved goods aligns with strong long-term secular trends toward sustainability, circular economy, and value-seeking behavior, which can drive higher user engagement and support gross merchandise volume and future revenue growth.
  
• The company’s investment in AI-powered tools, such as magical listings and AI-driven discovery experiences, is making the platform more efficient and user-friendly for both buyers and sellers, reducing friction and supporting greater seller acquisition, which is likely to sustain or boost overall earnings.
  
• Continued expansion of first-party advertising products and high adoption rates by sellers is yielding double-digit ad revenue growth, which supports margin expansion and incremental high-margin revenue streams for eBay.
  
• International and geo-specific initiatives, particularly improvements to the consumer-to-consumer experience in core markets like the UK and Germany, are driving notable increases in seller and buyer engagement, enabling eBay to capture a larger share of the recommerce total addressable market and improving long-term revenue and operating income.
  
• eBay’s resilient and diversified platform, bolstered by the scale of its global seller base, extensive catalog of non-new inventory, and adaptive cross-border trade solutions such as SpeedPAK, positions the business to withstand macroeconomic and tariff-related shocks, thereby helping to protect net margins and earnings even during adverse industry cycles.

Valuation

• The assumed bearish price target for eBay is $50.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of eBay's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $90.0, and the most bearish reporting a price target of just $50.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $10.8 billion, earnings will come to $1.9 billion, and it would be trading on a PE ratio of 12.8x, assuming you use a discount rate of 8.3%.
• Given the current share price of $81.93, the bearish analyst price target of $50.0 is 63.9% lower.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.