Online markets are increasingly facing competitive pressures, both online and offline. These marketplaces should strive to attract both buyers and sellers to their platforms. To add to their woes, macroeconomic uncertainty, including higher shipping costs and staff shortages, has only made the problem worse for online marketplaces like eBay.
With that in mind, let’s compare two online marketplaces using stock comparison tool TipRanks that are set to report Q4 results this week, eBay and The RealReal. We’ll also look at what Wall Street analysts are saying about these stocks.
eBay is an online marketplace that connects buyers and sellers in 190 markets around the world. The company is expected to announce its fourth quarter results on February 23.
eBay is currently going through a transition period, as it has sold several business segments over the past two years, including StubHub, Classifieds, and EBAY Korea. The company has made it clear that it intends to focus more on its Marketplace platform.
The company’s business strategy is to use technology to improve the market experience for its customers and drive gross merchandise value (GMV) growth.
In the fourth quarter, eBay forecast revenue of between $2.57 billion and $2.62 billion, a year-over-year organic growth rate of between 3% and 5% on a currency-neutral basis. The company expects earnings to be between $0.97 per share and $1.01 per share, versus the consensus estimate of $1.
This outlook indicates that the company expects its revenue growth rate to slow in the fourth quarter from a year-over-year growth rate of 10% in the third quarter on a currency-neutral basis. Company management said on its third-quarter earnings call that its fourth-quarter revenue outlook “implies that GMV is down in teens on a currency-neutral basis versus the US.” last year”.
This GMV outlook is also echoed by Robert W. Baird analyst Colin Sebastian, who expects GMV to fall in the first half of this year, “Before flattening out or growing modestly Y/Y [year-over-year] in 2H22.
Interestingly, eBay measures its footprint in the addressable market, according to the GMV. eBay defines GMV as all paid transactions on its platforms, including shipping and taxes.
Meanwhile, Sebastian is optimistic about eBay’s managed payments business and expects the business to grow its profits and revenue significantly over the next two to three years. Indeed, in Q3, 90% of its GMV on the platform was processed through the managed payments platform.
Managed Payments is eBay’s own payment platform that processes payments for purchases through eBay.
Additionally, the analyst is bullish on eBay’s advertising business and believes it will be a strong driver of long-term growth.
As a result, Sebastian has a buy rating and price target of $80 (up 44.3%) on the stock.
The rest of the street analysts are cautiously bullish on EBAY with a Moderate Buy consensus rating based on 5 Buys and 6 Takes. The average EBAY stock forecast was $76.36, implying an upside potential of around 37.7% from current levels for this stock.
Shares of The RealReal have fallen 71.7% in the past year, after hitting a high of $30.22. On Friday, shares closed at $8.11. RealReal is an online marketplace for authenticated second-hand luxury goods. The company is an omnichannel retailer of luxury goods and sells through its website, mobile app and retail stores.
The online marketplace offers luxury goods in several categories, including men’s, women’s, children’s, jewelry and watches, as well as home and art.
The majority of the company’s revenue is generated from consignment sales, followed by other services and direct sales.
When REAL sells goods through retail stores or its online marketplace on behalf of its shippers, the company keeps a percentage of the proceeds, defined as a take rate. At the end of the third quarter, the company’s participation rate fell to 34.9%, compared to 35.4% for the same period last year. The lower take-up rate was driven by higher contributions from products that had a lower take-up rate.
The company also earns revenue from its shipping costs and a monthly subscription program, First Look, which gives buyers early access to merchandise available for sale. As of September 30, the company had a global member base of 24.7 million.
Additionally, REAL’s GMV increased 50% year-over-year to $367.9 million in the third quarter. In a business update provided in January, REAL said that in December its GMV increased 40% year-over-year to $153 million.
REAL is expected to announce its fiscal fourth quarter and fiscal year 21 results on February 23.
The company admitted on its third-quarter earnings call that it faced higher shipping costs and staffing challenges at its authentication centers. To address these issues, the company’s management said on its third-quarter earnings call that it had “implemented several initiatives, including shipping diversification and last-mile optimization for shipping costs. shipping and extensive automation and our authentication centers to address staffing shortages”.
Needham analyst Anna Andreeva is positive about the measures. Additionally, the analyst expects “self-help initiatives (increasing brand visibility, improving pricing through data and automation, building retail stores) to drive sales.” and profitability”.
While Andreeva is bullish on the stock with a Buy rating, the analyst lowered the price target from $35 to $25 (up 208.3%) reflecting current market conditions. Additionally, Andreeva pointed out that REAL is trading at just 1.3 times its estimated enterprise value (EV) over sales for 2022, “which is lower than the average multiples of the market. [e-commerce] group (2.3x).
The rest of the street analysts are cautiously bullish on REAL, with a Moderate Buy consensus rating based on 6 Buys and 3 Takes. The REAL stock’s average forecast was $18.56, implying an upside potential of around 128.9% from current levels for this stock.
Interestingly, a look at website stats from The RealReal’s website using the TipRanks Website Traffic tool reveals a trend that supports Wall Street analysts’ cautiously bullish stance on the stock. The company’s estimated number of fourth-quarter visitors fell 10.9% year-over-year to 20 million.
While Wall Street analysts are cautiously bullish on both stocks, based on upside potential over the next 12 months, REAL looks like a better buy.
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