eBay (EBAY) US Listings Still Strong, Stock Still Cheap

After years of malaise, bizarre acquisitions (e.g., Internet phone company Skype), and increasing competition, eBay’s stock has been left for dead. Specifically, it now trades at just north of 15X free cash flow, a level normally reserved for moribund old media companies.

With a new CEO and a new focus on its user interface, however, eBay finally appears to be headed in the right direction. What’s more, listing trends in the core business continue to exceed expectations. eBay has recently changed its pricing, so it’s hard to draw a direct correlation between listings and revenue, but the listing trends are positive. JP Morgan’s Imran Khan:

  • On a reported basis, we have tracked 493.1M listings on eBay’s sites through June 1, up 22.7% Y/Y, ahead of our estimate of 12% listings growth for the quarter. QTD listings have gotten a significant boost from promotions in Germany.
  • Germany continues to drive international strength. International listings are up 27.9% Y/Y so far this quarter. eBay’s German site is exhibiting very strong growth driven in part by a reduced-listing fee promo for catalogue items, with QTD listings up 43.8% Y/Y. German listings are seeing notable strength in music (up 147%) and PC/Video Games (up 69%). In the UK, listings have tracked up 16.0% Y/Y, partly boosted by promotions including a UK half-price listing day this week that we estimate contributed ~2M listings. Australian listings are up 14% Y/Y.
  • US listings inc. Motors up 14.7% Y/Y at 167.1M. US listings of 153.1M (ex Motors & Stores) are up 14.5% Y/Y. QTD, Books (up 54% Y/Y), Video Games (up 39%), DVD & Movies (up 25%) and Computers & Networking (up 24%) continue to be strong performers. On a relative basis, Collectibles, Toys & Hobbies and Sports Memorabilia have lagged, with Y/Y listings growth of 5-6% in each of those categories.
  • Stores listings continue to rise. Our tracking suggests eBay Stores listings are continuing to show Y/Y growth: US Stores listings have tracked up 21.7% QTD, while total Stores listings are up 17.4% since the beginning of the quarter.
  • eBay trades at a 36% discount to peers. On an EV/EBITDA basis, eBay trades at 10.7x our F’08 estimate, vs. its peers at 16.8x. We believe such a discount is unwarranted and thus reiterate our OW rating.

Disclosure: Henry Blodget has a long-term position in eBay.

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