Revising Our Outlook Lower After Ebay's Update
We are reducing our $44 fair value estimate and see the stock as modestly undervalued but would prefer a wider margin of safety.
We still believe mid- to high-single digit GMV growth is the most realistic assumption over the next five years, below our low- to midteens growth forecast for the global e-commerce industry. Our outlook factors in Amazon's aggressive pursuit of small and midsize business sellers and many national retailers reaping benefits from new omnichannel strategies. We don't doubt that the measures eBay is taking will make its marketplace more competitive--particularly in C2C, which is the basis of our narrow moat rating--but customer acquisition and retention efforts may weigh on margins. As such, we plan a modest reduction in our medium-term revenue growth and margin assumptions, reducing our $44 fair value estimate by a few dollars. While we view eBay shares as modestly undervalued and see its capital allocation efforts as attractive, we'd prefer a wider margin of safety at current levels.
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