Analyst Note| Sean Dunlop |
Narrow-moat eBay reported third-quarter earnings in line with expectations, with $2.5 billion in revenue and $0.90 in non-GAAP EPS clocking in near our forecasts of $2.5 billion and $0.89, respectively. While the firm saw a double-digit annual decline in gross merchandise volume, or GMV, (down 12% from the year ago period), this was largely contemplated in guidance, as the marketplace operator lapped a pandemic-induced mix-shift towards e-commerce purchases, stimulus payments, and restrictions in services spending. As we consider sales leverage over general, administrative, and marketing expenses (consistent with a faster rollout of payment processing than we initially anticipated), and a higher-than-expected take rate (to 12.3%-12.5% in the near to medium term, ahead of our prior 11.5% to 11.7% expectation), we plan to raise our fair value estimate of $66 per share by a high-single-digit percent. This change leaves shares trading in a range we'd consider fairly valued, particularly after a 5% correction post-print.