Can eBay Break Higher?

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 with online and mobile commerce in the U.S. and around the world. Its marketplaces segment operates e-commerce platform eBay.com and vertical shopping sites. The company operates through three segments: Marketplaces, Payments, and GSI. Ultimately, through its tools and platforms, eBay assists individuals and merchants around the globe engage in online and mobile commerce.

EBay has recently faced a massive hacking attack, affecting approximately 145 million accounts. It has resulted in affecting approximately 145 million user records thereby creating massive breach of user records. However, the company has confirmed no major threats to the consumers. The company has launched a series of investigations in the same to nail down the hackers and cause of the same. The company has requested its customers to change their passwords with immediate effect for best results. The hackers were able to dodge the business from believing in any potential mishap due to encrypted passwords. The spokesperson of eBay, Amanda Miller, said that there is no evidence of any harm to its consumers. The details accessed by hackers do not contain any financial information of the customers thereby diluting the gravity of the information.

T = Technicals on the Stock Chart Are Mixed

Ebay stock has been pulling back in recent times. However, the stock is currently moving higher and looks poised to continue. 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 below its rising key averages which signal neutral to bearish price action in the near-term.

EBAY

(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

23.48%

6%

4%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

June Options

Steep

Average

July Options

Steep

Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bearish 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 Mixed 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?

2014 Q1

2013 Q4

2013 Q3

2013 Q2

Earnings Growth (Y-O-Y)

-456.86%

14.32%

16.36%

-7.55%

Revenue Growth (Y-O-Y)

13.71%

13.45%

14.34%

14.1%

Earnings Reaction

-4.96%

0.97%

-3.99%

-6.72%

Ebay has seen mixed earnings and increasing revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings with Ebay’s recent earnings announcements.

P = Excellent 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

-5.09%

-22.70%

-48.50%

-23.00%

-23.82%

Ebay has been a relative performance leader, year-to-date.

Conclusion

Ebay is an established company that has made a name for itself pioneering internet commerce. The company has recently faced a massive hacking attack, affecting approximately 145 million accounts. The stock has been pulling back in recent times, but is currently moving higher. Over the last four quarters, earnings have been mixed while revenues have been rising, which has produced mixed feelings among investors. Relative to its peers and sector, eBay has been a relative year-to-date performance leader. WAIT AND SEE what Ebay does this quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

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