eBay Inc. (NASDAQ:EBAY) received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine eBay’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in eBay?
Great news for investors – eBay is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $103.16, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, eBay’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will eBay generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of eBay, it is expected to deliver a relatively unexciting earnings growth of 1.5%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since EBAY is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on EBAY for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy EBAY. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.
If you'd like to know more about eBay as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 2 warning signs for eBay and we think they deserve your attention.
If you are no longer interested in eBay, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.