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Why eBay Stock Rose 10% in February

John Ballard, The Motley Fool

What happened

Shares of eBay (NASDAQ: EBAY) gained 10.4% in value last month, according to data provided by S&P Global Market Intelligence.

It certainly helped that the overall market rebounded to start the year, which propped up eBay's stock. The momentum continued last month after eBay reported its fourth-quarter earnings in late January and management announced the company's first dividend.

eBay headquarters

Image source: eBay.

So what

eBay's recent earnings report didn't show any substantial improvement in operating performance from previous quarters. The company continued to see slowing growth in its marketplace business, which management attributed to a deceleration in gross merchandise volume (GMV). 

Active buyer growth was up 4% last quarter, but GMV slowed to a 3% growth rate, as some of the simplified buying experiences management has implemented over the last year in the marketplace put pressure on conversion rates with existing buyers. 

Despite slowing growth, the stock continued its rebound last month, which likely reflects the low expectations factored into the stock's valuation. Even with low expectations for future growth, eBay's stock trades for a forward P/E of 12.3. 

Investors were given more reason to buy the stock after the company initiated a quarterly dividend payment of $0.14 per share, representing a forward dividend yield of 1.51% currently. 

Now what

The news got better for investors at the beginning of March, when eBay announced it was undergoing a strategic review to identify ways to improve growth in revenue and profit. Additionally, management is considering a possible sale, spin-off, or other business combination of eBay's StubHub and Classifieds Group. 

eBay is in a tough spot as it tries to find the right marketing message to attract buyers to its marketplace amid heightened competition in e-commerce. However, the new dividend and management's willingness to consider other options to enhance growth are positive developments for shareholders.

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John Ballard has no position in any of the stocks mentioned. The Motley Fool recommends eBay. The Motley Fool has a disclosure policy.