With shares of eBay (NASDAQ:EBAY) trading around $52, is EBAY an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
EBay provides online platforms, tools, and services to help individuals and merchants in online and mobile commerce and payments in the United States and internationally. Its marketplaces segment operates ecommerce platform eBay.com; vertical shopping sites. The company operates through three segments: Marketplaces, Payments, and GSI. Ultimately, through its tools and platforms, EBay assists individuals and small, medium and merchants around the globe engage in online and mobile commerce and payments. As commerce moves online at an increasing rate, companies like eBay are poised to see rising profits.
T = Technicals on the Stock Chart are Mixed
EBay stock has seen a bullish run in the last several years which has taken it to key price levels. At these price levels, investors must make a decision to push the stock higher or sell at these key resistance prices. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, eBay is trading around its key averages which signal neutral price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of eBay options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| eBay Options | 30.36% | 13% | 10% |
What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| May Options | Average | Average |
| June Options | Average | Average |
As of today, there is an average demand from call and put buyers or sellers, neutral over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Increasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on eBay’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for eBay look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 15.91% | -62.10% | 21.62% | 140.9% |
| Revenue Growth (Y-O-Y) | 14.37% | 18.14% | 14.77% | 23.12% |
| Earnings Reaction | -5.84% | 2.4% | 5.45% | 8.62% |
EBay has seen increasing earnings and revenue figures over most of the last four quarters. From these figures, the markets have generally been happy with eBay’s recent earnings announcements.
P = Poor Relative Performance Versus Peers and Sector
How has eBay stock done relative to its peers, Amazon (NASDAQ:AMZN), Overstock (NASDAQ:OSTK), Mercadolibre (NASDAQ:MELI), and sector?
| eBay | Amazon | Overstock | Mercadolibre | Sector | |
| Year-to-Date Return | 3.22% | 0.94% | 45.35% | 26.80% | 14.90% |
EBay has been a relative underperformer, year-to-date.
Conclusion
EBay provides online platforms to consumers and businesses who are engaging in Internet commerce at an increasing rate, worldwide. The stock has been a strong performer in recent years and is now trading at critical price levels. Earnings and revenue figures have grown at a reasonable pace which has kept investors satisfied. Relative to its peers and sector, eBay has trailed in year-to-date performance. WAIT AND SEE what eBay does this coming quarter.
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