eBay Stock: Undervaluation Despite E-Commerce Slowdown – Seeking Alpha

Justin Sullivan

As eBay Inc’s (NASDAQ:EBAY) income had declined by 5.9% YoY in Q1 2022, we decided the outlook of The internet retail enterprise based mostly on retail gross sales and e-commerce as a share of complete retail gross sales. Furthermore, we in contrast eBay with The very biggest 10 largest e-commerce corporations When it Includes its market share, gross sales progress, analyst income consensus beat and inventory worth change.

Retail Industry Outlook Slowdown in 2022

US Census Bureau, Khaveen Investments

Based on FRED, US Retail gross sales grew by 10.8% YoY in Q1 2022, decrease than the earlier quarter at 14.9%. The Nationwide Retail Federation (‘NRF’) anticipated retail gross sales to develop between 6% And eight% to Greater than $4.86 tln in 2022. However, its forecast is significantly sdecrease than the 14% annual progress price in 2021, which was the extremeest In further than 20 yrs. Although, the NRF’s 2022 outlook Continues to be above The ten-yr and pre-pandemic progress price Of three.7%. Furthermore, the NRF defined that it anticipates inflation to persist till 2023 However the retail enterprise To revenue from declining unemployment And extremely effective wage progress.

However, the NRF’s forecast was launched in March 2022, thus we furtherly referred to Amazon (AMZN) and Walmart’s (WMT) income steerage which was launched in April And ought to for every agency respectively. Based on Amazon’s steerage, it anticipates its income to develop by 5% On the midlevel in Q2 2022. Furthermore, Walmart guided its 2022 full-yr gross sales progress to between 4.5% To 5% (excluding divestitures).

In our view, we think about inflation which had enhanced to its extremeest diploma for the yr of 8.6% might translate to extremeer promoting prices and revenue retail enterprise gross sales. However, shopper confidence had declined based mostly on The client Convention Board’s Consumer Confidence Index which had dropped to its lowest diploma in 2022 at 98.7 from 111.1. The Convention Board defines the index as a “month-to-month report of shopper attitudes and buying for intentions” based mostly on a quantity of elements Similar to age, income and area. Thus, the placeas we anticipate the retail enterprise To revenue from extremeer prices, we think about the declining shopper confidence signifies decrease demand which is adverse for retail gross sales. Based on the chart above, retail gross sales progress had decelepriced from 2021 at a peak in Q1 2021 as inflation had risen all by way of 2021. Furthermore, the US Federal Reserve raised its Fed Funds Rate in June by 75 basis factors and we anticipate this to pose a hazard to shopper spending with extremeer borrowing prices influenceing debtors which might Finish in lowered shopper buying for power.

Furthermore, the placeas unemployment had declined and wage progress had been strong Initially of the yr, the month-to-month unemployment price had stayed at 3.6% since March 2022 and wage progress modepriced to 11.67% …….

Source: https://seekingalpha.com/article/4523052-ebay-massive-undervaluation-despite-ecommerce-slowdown