Potential Recession may push EBAY shares towards $20.
Got a headache thinking about the future of your eBay stock (NASDAQ: EBAY)? A whopping 75% drop in just a few months? While it might sound extreme, history has shown such dramatic declines can happen.
Let's take a look at the current state of affairs: So far this year, eBay has outperformed the S&P 500, with a 9% gain compared to the S&P 500's 4% dip. This stellar performance was partly due to increased investor excitement following Meta's announcement that some eBay listings would be showcased on Facebook Marketplace.
But, there are broader market worries on the horizon. Factors like tariffs have spurred a widespread sell-off, causing concerns about future market volatility for eBay. Remember, eBay's stock has shown vulnerability during economic downturns in the past. In 2022, it took a tumble of 45% over a few quarters, and during the 2008 recession, it crashed an astounding 75%. Right now, eBay is trading at $68, close to its 52-week peak of $71. Given eBay's historical volatility, a significant market downturn could potentially drive the stock price below $20.
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Let's dive into the latest happenings: Although eBay's partnership with Facebook might bolster its competitive position, investors must take broader economic risks into account. As an online retail platform, eBay is exposed to declines in consumer spending. In fact, recent retail sales data showed a minimal 0.2% increase for the month, recovering from a revised 1.2% decline the previous month - far short of the expected 0.6% growth.
Despite a slight easing of inflation concerns, they remain a significant factor. Trump's aggressive policies on tariffs and immigration have renewed worries about potential inflationary pressures. Add to that the U.S. economy's vulnerability to contraction, and a recession becomes more probable.
The global political landscape is as unstable as ever, with tensions rising between nations. After a January ceasefire, Israel resumed its military operations in Gaza, with lethal strikes occurring on March 18th. The ongoing Ukraine-Russia conflict, deteriorating relationships with traditional allies like Canada, Mexico, and European nations, and rising trade tensions add additional risk to the market environment. To stay in the loop, take a look at our analysis on the big picture. Given these complex dynamics, investors should keep a close eye on macroeconomic indicators when assessing eBay or similar investments.
So, How Resilient is EBAY Stock During a Downturn?
During some recent downturns, EBAY stock has showed a performance slightly worse than the benchmark S&P 500 index. Worried about the impact of a market crash on EBAY stock? Check out our dashboard How Low Can Stocks Go During a Market Crash to see how key stocks have fared during and after the last six market crashes.
Inflation Shock (2022)
• EBAY stock dropped 44.9% from $66.81 on 6 January 2022 to $36.81 on 2 October 2022, compared to a peak-to-trough decline of 25.4% for the S&P 500.• After a period of recovery, the stock reached its pre-Crisis peak by 8 October 2024.• Since then, the stock reached a high of $70.93 on 25 February 2025 and is currently trading at around $68.
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eBay's revenues have declined at an average rate of 0.4% over the last three years, compared to a 6.3% increase for the S&P 500. Notably, the company's operating margin has fallen from 28.1% in 2021 to 22.5% in 2024. However, this doesn't seem to reflect in the company's valuation, as EBAY stock is currently trading at 3.3x trailing revenues, representing a slight premium compared to its three-year average P/S ratio of 2.5x.
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Given the likelihood of a slowdown in growth and broader economic uncertainties, it's worth asking, "Do you plan to hold onto your EBAY stock now, or will you flee and sell if it starts to drop to $40, $20, or even lower levels?" Holding onto a declining stock isn't easy. Trefis collaborates with Empirical Asset Management-a Boston area wealth manager-whose asset allocation strategies delivered positive returns during the 2008-09 period when the S&P lost more than 40%. By integrating the Trefis HQ Portfolio into this strategic framework, clients have enjoyed better returns and reduced risk compared to the benchmark index, offering a more stable experience, as indicated by the HQ Portfolio performance metrics.
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Insights:
- During downturns, eBay has shown resilience yet underperformed the S&P 500 in some instances.
- Consumer behavior, competition, and macroeconomic factors influence eBay's performance during recessions.
- Competition from larger e-commerce platforms like Amazon and Alibaba can impact eBay's performance in stressful economic conditions.
- eBay's partnership with Facebook and diversification efforts can help mitigate some challenges during downturns.
- Investors should consider broader economic risks and macroeconomic indicators when assessing eBay or similar investments.
- For reduced risk and better returns, consider a diversified portfolio like the Trefis HQ Portfolio, which offered positive returns during the 2008-09 market downturn.
- During periods of recession, eBay's performance has occasionally been slightly worse than the S&P 500 benchmark, such as experiencing a 45% drop in 2022 and a devastating 75% crash during the 2008 recession.
- Should a market crash occur, the likelihood is high for eBay's stock price to potentially plummet below $20, depending on the severity of the economic downturn.
- As eBay's stock has demonstrated vulnerability during economic downturns, investors must consider broader economic risks, like fluctuations in consumer spending and potential inflationary pressures stemming from policies like tariffs and trade tensions.