On Wednesday, UBS adjusted its price target for eBay (NASDAQ:EBAY), increasing it to $47.00 from the previous $46.00, while keeping a Neutral rating on the stock.
"While the near term macro headwinds particularly for Western Europe (company citing negative GDP growth in their two largest International territories UK and DE) continue to weigh on growth expectations, the most important takeaway for us was the initial FY24 outlook which contemplates a potential return to GMV growth in the second half of 2024," said analysts at UBS.
Despite near-term macroeconomic challenges, particularly in Western Europe, where eBay has noted negative GDP growth in the UK and Germany, its two largest international markets, the company's revenue is expected to surpass GMV growth by 2 percentage points (excluding foreign exchange impacts). This is primarily due to an increased take-rate and advertising revenues growing faster than GMV.
eBay has projected non-GAAP operating margin expansion of 60 to 100 basis points, partly due to a year-over-year margin tailwind of approximately 40 basis points resulting from the extension of its data center equipment's useful life from three to four years. Consequently, non-GAAP EPS is forecasted to grow by 8-10% year-over-year.
Furthermore, eBay's management has announced an additional $2 billion share repurchase program to be completed in the fiscal year 2024. This move is expected to reduce the company's outstanding shares by approximately 8%.
The firm's updated price target reflects confidence in eBay's potential for margin expansion and earnings growth, despite the ongoing macroeconomic pressures that may affect the company's near-term growth trajectory.
InvestingPro Insights
UBS's revised price target for eBay (NASDAQ:EBAY) aligns closely with emerging trends and data that suggest a promising outlook for the company. According to real-time data from InvestingPro, eBay's market capitalization stands at a robust $24.89 billion, with an attractive P/E ratio of just 9.22, indicating that the stock may be undervalued relative to its earnings. Furthermore, the company's impressive gross profit margin over the last twelve months as of Q1 2023 was 71.98%, showcasing eBay's ability to maintain profitability despite macroeconomic challenges.
InvestingPro Tips highlight several key strengths for eBay, including management's aggressive share buyback strategy and the fact that the company holds more cash than debt on its balance sheet. These factors, combined with a high shareholder yield and a history of raising its dividend for 5 consecutive years, paint a picture of a financially healthy and shareholder-friendly company. Moreover, 15 analysts have revised their earnings upwards for the upcoming period, suggesting confidence in eBay’s financial prospects.
eBay's strategic initiatives, such as the additional $2 billion share repurchase program mentioned in the article, are reflected in the InvestingPro Tips, which note the significant return over the last week and strong returns over the last month and three months. This demonstrates the market's positive reaction to eBay's corporate actions and financial performance.
For readers looking to delve deeper into eBay's financial health and future potential, InvestingPro offers a comprehensive list of tips, with 14 additional insights available. These include metrics such as eBay's RSI suggesting the stock is in overbought territory and the fact that the company is trading near its 52-week high. To access these insights and more, readers are encouraged to visit https://www.investing.com/pro/EBAY and can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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