October 19, 2020 BARRON’S 19
ago. It has evolved from auctions to
fixed-price sales. A pioneer when the
web was built around desktop PCs,
eBay now does two-thirds of its
transactions via mobile devices. The
company shed PayPal in 2015 and
earlier this year sold ticketing firm
StubHub for $4 billion. EBay also has
a pending deal to sell its classified-
ads business for $9.2 billion. All of
those sales came after prodding from
activist investors.
The slimmed-down eBay is going
back to the basics, helped by new CEO
Jamie Iannone, who took over in April
after serving as chief operating officer
ofWalmart’s (WMT) e-commerce
arm. Iannone himself is recycled,
having spent eight years at eBay in
various roles. On eBay, everything—
and everyone—gets a second life.
While eBay shares have rallied 55%
this year, those gains pale in compari-
son with flashier e-commerce stocks.
The company fetches just 15 times
earnings estimates for the next 12
months, versus 81 times for Amazon
and a whopping 473 times for Shopify.
The multiples confirm that inves-
tors still have significant doubts about
eBay’s role in modern e-commerce.
This year, eBay’s net income is ex-
pected to rise 7.1%, to $2.59 billion, on
roughly flat sales of $10.7 billion. That
revenue makes it more than four times
the size of e-commerce software com-
pany Shopify, which nevertheless
carries a market value more than
triple that of eBay.
W
hile eBay doesn’t have the
growth of its peers, there are
signs that its back-to-basics
strategy is paying off. After
two quarters of declines, sales rose 7%
in the June quarter, and eBay’s active
buyer base was 182 million, up eight
million from the previous quarter.
“There’s so much untapped poten-
tial,” says Iannone, who talks about a
“tech-led reimagination of eBay.”
He has distinguished eBay by
focusing on “‘non-new in season”—
the kind of merchandise you can’t
generally find at the mall or on Ama-
zon, including previous-season ap-
parel, and used, vintage, and certified
refurbished goods.
“It is a radically different focus area
for us,” Iannone says. “We had lost
focus on this great sweet spot for eBay.”
Used and vintage doesn’t necessar-
ily mean cheap. Under Iannone’s brief
tenure, eBay has already rolled out a
program to authenticate antique
watches selling for $2,000 or more,
unveiled a certification program for
high-price sneakers, and introduced a
new “certified refurb” program, giving
consumers a protected way to buy
factory-restored items.
The efforts have started to boost
results, as have shoppers who are
stuck at home. In its June quarter,
eBay’s core Marketplace had revenue
of $2.7 billion, up 24%. Gross mer-
chandise value—the total value of
products sold on the site—was $27.
billion, up 26%.
Wall Street remains generally luke-
warm on the stock; nearly two-thirds
of the 35 Wall Street analysts who
cover eBay rate the stock at Hold or its
equivalent.
But sentiment could be shifting.
This past week, CFRA analyst John
Freeman upgraded eBay shares to Buy
from Hold, bumping his price target to
$64, or 15% above the stock’s recent
close. He thinks that Iannone is
making “strong initial progress” on
restructuring eBay, reigniting growth,
and boosting profitability.
Five years after spinning off Pay-
Pal, eBay has a growing and improved
payments platform, one that’s built
specifically for eBay transactions. The
so-called managed payments platform
allows buyers to use Apple Pay,
Google Pay, credit cards—or PayPal.
Sellers need only one account regard-
less of the payment being used.
Iannone thinks that the payments
business can generate an extra $2 bil-
lion in annual revenue and $500 mil-
lion of operating income by 2022. The
company has also gotten more aggres-
sive in selling advertising—paid pro-
motion on the site—with ad sales of
almost $200 million in the latest
quarter, up 120% from a year ago.
Meanwhile, in markets where the
economy has reopened, Iannone says
growth has moderated but remains
above pre-Covid-19 levels. eBay has
been rolling out programs to motivate
new sellers. The company estimates
that the average household has
$4,000 worth of goods no longer be-
ing used that could be sold online.
Iannone says he just listed his
son’s Sony PlayStation 4 for sale.
Now, more than ever, everyone likes a
bargain. Even one that needs a few
repairs.B
EBayHasaNewLook
AndaCheapStock
As online retail soars, eBay has been overlooked. Why a back-to-basics
strategy could help the e-commerce pioneer regain its relevance.
Shopping for Online Bargains
Among e-commerce leaders, eBay stands out for its low valuation. How they all stack up.
Company / Ticker Recent Price 52-Week Change Market Value (bil) Forward P/E
eBay / EBAY $55.40 42% $38.8 14.
Shopify / SHOP 1,078.30 212 131.2 472.
Wayfair / W 298.00 173 28.4 241.
Amazon.com / AMZN 3,338.65 89 1,672.3 81.
Etsy / ETSY 150.67 151 18.0 69.
Sources: Bloomberg; FactSetBy ERIC J. SAVITZ
I
n September 1995,eBay
founder Pierre Omidyar sold
the first item on his quirky
e-commerce site—a broken
laser pointer. He had listed the
device for a dollar, but a bid-
ding war broke out and it sold
for $14.83. Millions of transactions
later, there’s another dented piece of
merchandise available at a discount:
eBay’s stock.
Even as investors marvel over the
pandemic-driven growth for e-com-
merce leadersAmazon.com(ticker:
AMZN),Shopify(SHOP),Etsy
(ETSY), andWayfair(W), eBay
(EBAY) has been largely left out of the
conversation. It’s time for investors
to take a fresh look.
A lot has happened at eBay since
Illustration by Ana Yaelthe company excited investors years