SpeedPAK Shipping And PSA Trade Ties Will Redefine Future Markets

Key Takeaways

• Cross-border trade improvements and collectibles innovations are set to drive GMV growth and enhance revenue through better seller adaptability and high-interest segment engagement.
  
• Strategic fashion development and expanded financial services aim to boost conversion rates and margins, positioning eBay as a key player in fashion and payments.
  
• Tariffs, international market weakness, and competitive pressures create uncertainty for eBay, potentially impacting GMV growth, revenue, and profitability.

Catalysts

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

• eBay is focusing on cross-border trade improvements through enhancements like the SpeedPAK shipping program, which could mitigate the impact of tariffs and support gross merchandise volume (GMV) growth. This could positively impact revenue as these efficiencies help sellers adapt to new trade policies.
  
• The development of the collectibles category, including trading cards integrations with PSA, is expected to drive GMV growth with continued innovation and partnerships, potentially boosting revenue in this high-interest segment.
  
• eBay's strategic push in fashion, particularly pre-loved apparel, through AI-powered experiences and expanded inventory coverage, aims to establish the platform as a key destination for fashion products, likely enhancing both revenue and margins due to higher engagement.
  
• The expansion of payments and financial services, including partnerships like Klarna for buy now, pay later and eBay Balance, is designed to increase conversion rates and average order values, thereby improving overall revenue and net margins through optimized payment experiences.
  
• Innovation in artificial intelligence, including AI-powered listing tools, is designed to simplify the selling process, increase listing completion rates, and elevate seller satisfaction, potentially increasing GMV and earnings by attracting more active sellers to the platform.

eBay Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming eBay's revenue will grow by 3.8% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 19.9% today to 18.3% in 3 years time.
• Analysts expect earnings to reach $2.1 billion (and earnings per share of $4.81) by about May 2028, up from $2.0 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.4 billion in earnings, and the most bearish expecting $1.9 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.7x on those 2028 earnings, down from 15.8x 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 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.81%, as per the Simply Wall St company report.

eBay Future Earnings Per Share Growth

Risks

• Tariffs and changes in U.S. customs requirements create significant uncertainty for small businesses on eBay, potentially impacting future GMV and revenue.
  
• The increased costs and friction associated with tariffs can affect consumer confidence and discretionary spending, which could negatively impact revenue and net margins.
  
• The macro environment remains uncertain, with particularly weaker conditions in international markets like Germany and the U.K., potentially impacting GMV growth and overall revenue.
  
• Currency exchange rate fluctuations present a headwind, which could negatively affect GMV growth and reported revenue, impacting earnings.
  
• Rising competitive pressures, especially around the advertising revenue stream, could impact overall earnings and profitability if competitors gain market share.

Valuation

• The analysts have a consensus price target of $66.982 for eBay based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $79.0, and the most bearish reporting a price target of just $50.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $11.5 billion, earnings will come to $2.1 billion, and it would be trading on a PE ratio of 14.7x, assuming you use a discount rate of 7.8%.
  
• Given the current share price of $70.36, the analyst price target of $66.98 is 5.0% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• 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.