UBS downgrades eBay as the stock loses over 30% YTD

eBay (NASDAQ: EBAY) was one of the original e-commerce companies that allowed consumers and businesses to sell goods online. With the premise of an auction-style website, it enabled people to sell unused stuff from their houses to people all around the world. 

Despite being one of the originators of online marketplaces, the company has hit a snag recently, losing a lot of market value. Even investment banks are now scaling back their expectations of the business. On June 28, Kunal Madhukar, a UBS analyst, downgraded the stock from a ‘Buy’ to a ‘Neutral’, reducing the price target to $48 from $60.

Similarly, Morgan Stanely (NYSE: MS) analyst Lauren Schenk warned that new upstarts would start eating into eBay’s market share.   

“We believe eBay’s focus category strategy will push it increasingly towards less scalable investments as it has to verticalize the platform in order to compete with the new entrants. As a result, we see adj. [Adjusted] operating margin falling over the next few years to ~26%.”

EBAY chart and analysis

Meanwhile, the company’s shares are trading below all daily Simple Moving Averages (SMAs), trending down since November 2021. Recent trading volume spikes helped the shares bounce off the $40 level, possibly creating a new support line for the share price.  

This continuous downtrend caused the shares to lose over 30% year-to-date (YTD).

On the other hand, analysts on Wall Street rate the shares a moderate buy, predicting that the average next 12 months price could reach $55.05, which is 24.04% higher than the current trading price of $44.38.

Looking to the future

Despite the lackluster performance of the shares the company is trying to stay on top of things, which is evidenced by a recent acquisition of a premier non-fungible token (NFT) marketplace, KnownOrigin, that allows artists to create, collect, buy and sell their NFTs utilizing blockchain-supported transactions. 

Moreover, the company beat on earnings, by posting $2.48 billion in revenue, an annual decline of -6.1% but a beat by $20 million. Similarly, the earnings per share (EPS) was $1.05, a beat by $0.02.

Finally, the company is facing much steeper competition than it did when it was one of the only players in the e-commerce world. Poor share performance could be attributed to numerous factors; however, it seems that at the moment, the only certain thing for the share price is more volatility. 

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