Shares of online marketplace eBay(NASDAQ: EBAY) were up 11.6% in March, according to data provided by S&P Global Market Intelligence. While there wasn't a specific catalyst in March, the company reported full-year financial results for 2023 in late February. And some analysts weighed in positively about eBay stock in March in light of its 2023 report.
Some investors wrongly think that eBay is a business in decline. But the report for 2023 showed it is a stable business. In 2023, gross merchandise volume (the dollar value of sales on the platform) was down just 1% year over year to $73 billion. Revenue was up 3% to over $10 billion. And it consequently earned $2.8 billion in full-year net income -- that's still a big, strong business.
Following the report, Susquehanna analyst Shyam Patil raised his price target for eBay stock by nearly 21% to $52 per share. That's a big raise and likely caused some investors to rethink their skepticism for eBay stock.
Management for eBay presented at two investor conferences during March, which may have motivated some other analysts to officially weigh in on the stock as well. On March 8, Argus Research analyst Joseph Bonner raised his price target by about 9% to $58 per share, according to The Fly, representing about 13% more upside from where it trades now.
While price targets from analysts don't do anything material for the business, analyst commentary can help investors rethink their assumptions. And that appears to be what was happening for eBay in March.
Too cheap to pass up?
Going into March, eBay stock traded at around 9 times its trailing earnings, which is really cheap. And with earnings of $5.21 per diluted share in 2023, eBay stock still trades at less than 10 times earnings even after its gains in March.
EBAY PE Ratio data by YCharts
This is a really cheap valuation and suggestive of low investor confidence. But with a solid financial report for 2023 and positive analyst commentary, eBay stock found some footing.
Can eBay stock keep going up?
When talking to investors, eBay's management is quick to talk up its potential in advertising and with generative artificial intelligence (AI). However, the company will likely stay low-growth, in my opinion. And that's OK as long as management maintains operational discipline and keeps profit margins strong.
The reason this can work for investors is because eBay's management routinely gives back to shareholders. It repurchased $1.4 billion in stock during 2023 and is authorized to repurchase $3.4 billion more -- that's good for almost 14% of shares.
Moreover, eBay just raised its dividend by 8% -- its fifth consecutive year of paying and raising the dividend.
As long as eBay stock stays cheap and the business remains profitable, dividends and buybacks can add up to strong returns for shareholders. That's worth considering today even after its gains in March.
Should you invest $1,000 in eBay right now?
Before you buy stock in eBay, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and eBay wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 4, 2024
Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends eBay and recommends the following options: short July 2024 $52.50 calls on eBay. The Motley Fool has a disclosure policy.
