Liu Liyu, researcher of wenbibei curiosity Society

During the Great Depression of the whole industry under the epidemic situation, the unknown eBay went out of its own way. Before the online market entered April, eBay had been below $40, and now, eBay is expected to exceed $50.

Figure 1 eBay day K source bbae Bibei securities

The performance was flat, but Gmv increased significantly

EBay is currently one of the world's largest online trading platforms, with 25 international domain name websites serving millions of buyers and sellers around the world. Using online technology and services, the company, in a sense, overthrew the small flea market, bringing buyers and sellers together to trade anytime, anywhere. In recent years, eBay has been innovating in trading services, launching new international standard transportation services to help sellers save freight, support cross-border payment, and provide consumers' demand information for sellers through data network, so as to facilitate sellers to make wise choices on commodity inventory and pricing.

EBay's performance in 2020q1 was not impressive, with weak trading and advertising revenue (mainly traffic fees, which provided free platform services for sellers), with revenue down 1.6% to $2.37 billion.

Generally speaking, the impact of covid-19 on the company's revenue is very small, because the decline of classified advertising revenue (3% year-on-year decrease) is affected by relatively good transaction income (1% year-on-year decrease and 1% year-on-year growth excluding the impact of exchange rate changes). ）Offset. Trading volume is also down (1% year-on-year), especially in the United States, which is down 4% year-on-year. Non GAAP earnings per share rose to $0.77 (up 15.6% year-on-year), mainly due to $4 billion of buybacks in the quarter. Net income per share decreased by 15.6% on a year-on-year basis.

Figure 2 eBay financial performance unit: USD source: bbae Bibei securities

Although the performance is not impressive, the growth of Gmv (gross merchandise volume, mainly refers to the transaction amount of websites) in April was amazing, with a year-on-year increase of 20%. The surge could be the result of a number of recent factors, including broader network transfers during the covid-19 period, as well as government stimulus measures. Although it's a short-term stimulus, it's a good view of eBay's performance.

Figure 3 image source: investor presentation

In addition to its financial performance, eBay has made a significant digital upgrade under the epidemic. The company hired the chief operating officer of Wal Mart e-commerce as the new CEO, and accelerated the pace of upgrading. The positioning is further clarified, and the service market is for small enterprises.

As of June 4, eBay's user data has grown dramatically: thanks to increased traffic and improved marketing efficiency, eBay's new guidelines have increased Gmv from 23% to 26%. In addition, the platform has added six million new and reactivated buyers, as well as tens of thousands of small business sellers.

Photo 4 photo source: company announcement

To this end, eBay significantly increased its revenue forecast for 2020q2 by 14 percentage points, and its revenue growth target was 18% regardless of the impact of the exchange rate. Equally important, earnings per share will soar to $1.04, up more than 50 per cent from last year.

The secondary market, eBay, is undervalued

The e-commerce sector increased during the epidemic period. At present, the valuation of eBay is significantly lower than that of Amazon and Shopify. At present, the market value of Amazon is only about one-third of the total market value of $38.8 billion.

If you look at the financial situation of e-commerce business, eBay is expected to achieve sales of $2.75 billion in this quarter, while Shopify's target for this year is only $2.2 billion. The profitability of eBay is better than that of its competitors such as Amazon, WAYFAIR and Shopify. Therefore, there is a long-term driving force for the share price of eBay, while eBay in the secondary market is undervalued.

Figure 5 source of transaction volume of e-commerce business: bbae Bibei securities

EBay is one of the few companies in the U.S. stock market to announce its full year 2020 forecast. Under the epidemic situation, the sharp rise in e-commerce demand is a prominent reason for the rising share price and market value of eBay. As consumers expand online shopping, eBay expects the group's traffic and final sales to rise significantly.

eBay's in

So far, more and more sellers have joined eBay. Since March 2020, eBay has added thousands of small business sellers. Similarly, under the epidemic situation, the global e-commerce industry is optimistic. Gmv in the United States increased by 92.7% in May 2020 year-on-year. Gmv in April and may accounted for 22% of all retail sales, higher than 11% in 2019. Although some analysts think it is temporary, other e-commerce stocks are growing, and eBay has more room for growth.

Valuation performance

If the classified advertising division makes revenue at $10 billion or more, eBay will reach a record profit margin by the end of this year, increasing EPS and PE. In the figure below, the red line is EPS per share, which shows a rise of 133.2%. March to April is the lowest cost of new investment for eBay in at least three years.

Photo 6 source: ycharts

Combined with the results of Paul Franke's momentum analysis, since the end of January, eBay has outperformed the typical market return of the S & P 500 index by 30%. The red arrow indicates that the negative index (NVI) of the past year has shown a trend of steady accumulation. In the days of falling volume, many buyers pushed up their prices. As shown in the figure below, the blue arrow shows that the obv line has risen strongly since the end of March. Basically, buyers will appear in both high volume and low volume days. Overall, from the technical analysis, eBay is bullish.

Photo 7 image source: eBay: a notebook reverse higher

Risk tips

Under the epidemic situation, eBay ushered in the strong dawn of downstream market, but there are still risks worthy of investors' attention. After the outbreak, all sales growth in the past few months may fall back completely. Before the outbreak, eBay traded at less than $40, so the risk is that eBay may fall back to that level, which means abandoning at least its recent $10 gain. In addition, digital growth is not sure whether it is temporary market welfare or permanent performance, which is also related to the profitability of eBay.