Can eBay See Its Stock Move Higher?

With shares of eBay (NASDAQ:EBAY) trading around $50, 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.

On Thursday, Ebay Enterprise said that it has signed a multiyear accord with Fifth & Pacific Cos. Inc. (NYSE:FNP), which is the designer and marketer of a portfolio of premium, worldwide lifestyle brands. The company will supply fulfillment, warehouse and order management systems, freight, payments, and customer service solutions for Kate Spade Saturday, Kate Spade New York, Jack Spade, and Lucky Brand in the United States and Canada.

T = Technicals on the Stock Chart Are Mixed

Ebay stock has seen positive progress in recent years. The stock has struggled this year as it continues to pullback from nearly hitting all-time highs. 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

27.32%

60%

58%

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

Put IV Skew

Call IV Skew

December Options

Steep

Average

January 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 significant 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?

2013 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)

16.36%

-7.55%

15.91%

-62.10%

Revenue Growth (Y-O-Y)

14.34%

14.10%

14.37%

18.14%

Earnings Reaction

-3.99%

-6.72%

-5.84%

2.40%

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

P = Weak 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

-1.35%

48.89%

89.17%

43.28%

45.99%

Ebay has been a poor relative performer, year-to-date.

Conclusion

Ebay is an established company that has made a name for itself pioneering internet commerce. The company recently signed a multiyear accord with Fifth & Pacific Cos. Inc. The stock has moved higher in recent years but is now pulling back as it digests gains from a recent run. Over the last four quarters, earnings have been mixed while revenues have been rising which has left investors to expect more from the company. Relative to its peers and sector, eBay has been a weak year-to-date performer. WAIT AND SEE what eBay does this coming quarter.

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