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Why eBay (EBAY) Might be Well Poised for a Surge

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Zacks Equity Research
·2 min read
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EBay (EBAY) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this e-commerce company, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For eBay, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $1.02 per share for the current quarter, which represents a year-over-year change of +32.47%.

Over the last 30 days, the Zacks Consensus Estimate for eBay has increased 21.44% because six estimates have moved higher while one has gone lower.

Current-Year Estimate Revisions

The company is expected to earn $3.98 per share for the full year, which represents a change of +16.72% from the prior-year number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for eBay. Over the past month, 12 estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 9.26%.

Favorable Zacks Rank

The promising estimate revisions have helped eBay earn a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on eBay because of its solid estimate revisions, as evident from the stock's 18.4% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.


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