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STOCKS RISE, LED BY STELLAR ALPHABET, MICROSOFT EARNINGS

Latest stubborn U.S. inflation reading will bring about more 'wait and see' from the Fed

Should You Buy eBay Stock Ahead of Q3 Earnings?

Benjamin Rains
Updated

Shares of eBay EBAY rest near their 18-month low as we approach the e-commerce firm’s third-quarter earnings release. But eBay’s growth outlook appears pretty strong, so should investors consider buying eBay stock right now?

Overview

EBay, which spun off PayPal PYPL in 2015, has struggled mightily over the last year. In an effort to offer their sellers and buyers more options, eBay announced earlier this year that it will stop using PayPal as its back-end payments service after 2020.

The e-commerce firm signed a new agreement with Adyen, with eBay set to slowly transition buyers and sellers to its new payment system over the next several years. Investors should note that the Amsterdam-based payments firm boasts Uber, Spotify SPOT, Gap GPS, and other big companies as its clients.

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EBay has also pushed to stand out beyond its online thrift store image through new partnerships and advertisings campaigns to fight against Amazon AMZN and traditional retailers that have expanded their e-commerce presence in recent years. This includes agreements with Disney’s DIS ESPN, which includes making sports-related eBay items “discoverable” on EPSN.com and its mobile platforms. The company, which also owns online ticket marketplace StubHub, rolled out a new ad campaign to market itself as a place to buy on-trend items from fashion to toys.

The company saw its active buyer base jump 4% last quarter to reach 175 million around the world. EBay’s Q2 revenues climbed roughly 9% to reach $2.64 billion, while its gross merchandise volume popped 10% to $23.6 billion.

Stock Performance & Valuation 

Moving on, we can see that eBay stock has struggled over the last two years, falling well behind the larger e-commerce industry. Worst still, shares of eBay have plummeted over 15% in the last 12 months and roughly 12% during the past three months. EBay stock currently rests near its 18-month low and closed Tuesday at $33.28 per share.

 

The e-commerce firm’s decline has made its valuation picture appear a bit better than it has been. EBay is currently trading at 16.4X forward 12-month Zacks Consensus EPS, which represents a significant discount compared to its industry’s 37.6X average. Plus, eBay is trading well below its year-long high of 25.4X and its one-year median of 20.1X. And we can see that eBay is currently trading near its one-year low.

 

Outlook & Earnings Trends

Looking ahead, EBay’s Q3 revenues are expected to jump 10.5% to reach $2.66 billion, based on our current Zacks Consensus Estimate. Meanwhile, the e-commerce firm’s full-year revenues are projected to climb by over 13% to hit $10.82 billion.

EBay’s adjusted quarterly earnings are projected to pop by 14.6% to $0.55 per share. The company’s fiscal year EPS figure is expected to expand by 15% to reach $2.30 per share. The company has also seen some positive upward earnings estimate revision activity for Q3 as well as fiscal 2018 and 2019, over the last 30 days.

Bottom Line

The e-commerce firm’s recent positive earnings revision trends help eBay claim a Zacks Rank #2 (Buy). With that said, eBay has only beat our quarterly earnings estimates twice in the last six quarters. Therefore, it might be wise to just keep an eye on eBay to see if it can gain any post-earnings momentum.

EBay is expected to release its quarterly financial results on Wednesday, October 17.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

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The Walt Disney Company (DIS) : Free Stock Analysis Report
 
eBay Inc. (EBAY) : Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
 
The Gap, Inc. (GPS) : Free Stock Analysis Report
 
Spotify Technology SA (SPOT) : Free Stock Analysis Report
 
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Zacks Investment Research