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eBay stock was off to a great start in 2023. In fact, at one point in early February, it was up over 22% to begin the year. The turnaround was on! Finally, eBay is modernizing for a new era in the collectibles trade, and investors are taking notice...right?!
Fast forward to today, and the stock is up just 4% for 2023. Since reporting earnings in late February, eBay is down 8%. By no means a catastrophe, but certainly a bucket of cold water on a bullish start.
For years, collecting enthusiasts in categories like sneakers and trading cards have watched as eBay, home to their first episodes of collecting commerce, did little to adapt, evolve, and improve to meet heightening standards of customer experience. While StockX and GOAT created a sneaker resale experience that meaningfully reduced customer friction, buyers on eBay were left to sort through unintelligible product listings. You know the ones: "YEEZY 300V2 ZEBRA TURTLE DOVE RARE NEW DS JORDAN 1 NIKE ADIDAS.
"If that makes literally no sense to you....it shouldn't!!! It's utter nonsense that has been allowed - perhaps even incentivized - on the platform for far too long.
And if you're a card collector that uses eBay, as so many still do, we don't even have to begin to tell you about the platform's many shortcomings on that front. Alas, big investment capital is chasing the trading card space, competitors are consistently beefing up their capabilities and offerings, and inertia alone won't save eBay for long.
Over the last few years, eBay has recognized the 28-3 Atlanta Falcons-like folly of its ways, reinvigorating its efforts in focus areas like collectibles, sneakers, luxury, and motor parts. From the launch of vaulting to the introduction of authentication and authenticity guarantees (increasingly table stakes in key categories), it seemed the sleeping giant had perhaps not been fully awakened, but had at least been gently slapped in the face or had its hand placed in warm water (classic prank).
And the reality is: eBay is a giant. It absolutely remains a whale in many collectible categories, shortcomings be damned. The company still generates $74 billion in gross merchandise volume (GMV) annually from 134 million active buyers. That includes 16 million "enthusiast buyers" who execute 30+ transactions per year on the platform and spend more than $3,000.
With those figures in mind, though, we come back to the earnings report disappointment. The company actually beat earnings expectations, but a look under the hood posed cause for concern.
First, the company declined to give specific FY23 guidance. Given that the stock market is predominantly a forward-looking game, it's often forward-looking guidance provided at earnings releases that can significantly move share prices. Abstaining from providing it for the year, then, is a somewhat unusual but not entirely unprecedented choice, and it speaks to the uncertainty of the economic situation. The vague guidance that the seasonality in GMV would be similar to FY22 allows one to infer that GMV will once again decline annually, potentially bringing it below 2019 levels. That, of course, does not bode well, and it implies continued share loss.
It was noted on the earnings call that focused categories grew seven points faster than the overall business, but that equates to 2% growth despite significant investment. Not bad at all in a choppy market, but not a turbocharged turnaround. And those buyer figures? 134 million active buyers are down from 147 million buyers at the end of 2021, and the all-important enthusiast buyers are down from 19 million to 16.
Turnarounds don't happen in a day, but investor confidence in 2023 progress waned after the earnings report. Just as the Falcons wish they started milking the clock a bit earlier, it's likely eBay is left wishing they had rebooted and refreshed sooner. Still, the platform plays host to enormous volume. So long as people are collecting cards, you can bet that sellers will be receiving messages trying to cancel orders because the buyer's "kid" got a hold of their laptop and went on a very specific and sophisticated buying spree.
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