The Ratings Game: Global supply chain shortages could be a good thing for eBay this holiday season
Supply chain disruptions are a problem for many companies thanks to pandemic-related shutdowns, but for eBay Inc., they could actually be advantageous, according to Wedbush analysts.
“EBay will also likely benefit from global supply chain shortages in 4Q as eBay is
a strong alternative destination when products are out of stock,” analysts led by Ygal Arounian wrote in a note.
The company played up this holiday advantage in a separate blog post from Jordan Sweetnam, head of North America.
“EBay has always been the destination for people to shop for the impossible-to-find, and that won’t change, especially in a year when more items than ever are unavailable,” said Sweetnam.
“Online marketplaces are driven by supply and demand and naturally backfill products that are sold out everywhere else.”
Secondary market platform StockX has a similar message, saying that amid all of the supply chain disruptions, consumers shopping their site “can find the otherwise hard-to-find products, many of which were released years ago and have since lived on the shelves of longtime collectors and resellers alike.”
“Over the past year we have focused on attracting and retaining high value buyers by innovating in focused categories and targeting enthusiasts with upper-funnel marketing,” said Jamie Iannone, eBay’s chief executive, on the earnings call, according to FactSet.
“We’ve also discontinued legacy couponing that’s skewed towards low value buyers. These actions are resulting in a gradual evolution of our buyer base over time. Compared to the third quarter of 2019, high value buyers are up 6%.”
Despite the changes, Wedbush rates eBay shares at neutral with a $74 price target.
“While eBay is seeing strong performance from these verticals, some of these categories, in general, are seeing atypical strength and we’re cautious that some of that performance may not be sustainable,” analysts said.
Truist analysts are also taking a cautious approach.
“Management’s initiatives around improving the product experience for certain focus categories are showing green shoots with double digits GMV [gross merchandise volume] growth; and plans to make Auto (one of eBay’s largest) as the next category is astute and should help it further penetrate its global GMV,” analysts said.
“2022 growth outlook remains hazy though given likely GMV pressures, but a balanced management approach should help eBay improve margins and hit its 33.5% target.”
Truist rates eBay stock at hold but raised its price target to $77 from $75.
While noting that the company’s guidance is “somewhat disappointing” and the timing on an international recovery is still up in the air, Benchmark analysts are more upbeat about eBay’s path forward.
“The setup for 4Q post-print, however, now looks more appealing assuming 2022 GMV forecasts come in as ours did, with potential supply chain disruption-driven scarcity aiding volume and AOV [average order value],” analyst Daniel Kurnos wrote in a Benchmark note.
“[W]e see the potential for incremental revenue and margin upside from the expanded ad product rollout and assuming that most international focus categories ultimately follow the same path as their US counterparts… although 2022 could remain lumpy as initiatives scale.”
Benchmark rates eBay shares a buy with an $85 price target.
Ebay reported third-quarter earnings that beat expectations though GMV fell 10% year-over-year.
Ebay stock has rallied 48.7% for the year to date while the S&P 500 index
has gained 23.3% for the period.