Stock has declined almost 17% in 2018
The stock of Internet giant eBay (EBAY) has fallen 4.9% this month and 16.8% this year to close at $31.40. The stock has generated absolute returns of 28% in the last three years, 40% in the last five years, and 379% in the last ten years. Earlier this year, eBay disclosed its acquisition of Giosis, an online marketplace firm that primarily operates in Asia. The main asset in that deal was Qoo10, a leading Japanese online marketplace.
eBay posted a $642.0 million profit in the second quarter, meaning it spent an equivalent of 90.0% of its second-quarter profit on the Qoo10 deal, as the acquisition was valued at $573 million.
Revenue and earnings growth
Analysts expect eBay’s revenue to rise 13% to $10.8 billion in fiscal 2018 and then rise 7.70% to $11.64 billion in 2019. Analysts expect the company’s sales to rise by 9.5% in 2021 as well. This growth in sales is expected to push eBay’s EPS (earnings per share) 14.5% higher in 2018. Analysts expect EPS to rise 12.70% in fiscal 2019 and at a CAGR of 14.2% over the next five years.
When we compare these growth rates with the forward 2018 price-to-earnings ratio of 16.9x and 16.1x in 2019, it seems that eBay might be a tad undervalued.
Out of 38 analysts covering eBay, 16 have recommended a “buy” for the stock, 20 have recommended a “hold,” and two have recommended a “sell.” Their average 12-month target estimate for the stock is $43.93, indicating that eBay is trading at a discount of 40% to analysts’ target estimates.