What is EBAY's Intrinsic value?

eBay Inc (EBAY) Intrinsic Value Analysis

Executive Summary

As of June 17, 2025, eBay Inc's estimated intrinsic value ranges from $50.30 to $76.38 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $76.38 -1.7%
Discounted Cash Flow (5Y) $67.12 -13.6%
Dividend Discount Model (Multi-Stage) $51.14 -34.2%
Dividend Discount Model (Stable) $66.57 -14.3%
Earnings Power Value $50.30 -35.3%

Is eBay Inc (EBAY) undervalued or overvalued?

With the current market price at $77.71, the stock appears to be moderately overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate eBay Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.71 0.8
Cost of equity 7.1% 9.3%
Cost of debt 4.0% 4.6%
Tax rate 23.3% 25.3%
Debt/Equity ratio 0.21 0.21
After-tax WACC 6.4% 8.3%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.4% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $10,283 (FY12-2024) to $15,722 (FY12-2034)
  • Net profit margin expansion from 19% to 17%
  • Capital expenditures maintained at approximately 5% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $67 $34,656M 77.7%
10-Year Growth $76 $38,925M 61.6%
5-Year EBITDA $63 $32,589M 76.3%
10-Year EBITDA $72 $37,093M 59.8%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 25.9%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.2%
  • Long-term growth rate: 2.0%
  • Fair value: $51.14 (-34.2% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.3% (Low) to 7.1% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $37 to $96
  • Selected fair value: $66.57 (-14.3% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $1,955M
Discount Rate (WACC) 8.3% - 6.4%
Enterprise Value $23,480M - $30,328M
Net Debt $3,714M
Equity Value $19,766M - $26,614M
Outstanding Shares 461M
Fair Value $43 - $58
Selected Fair Value $50.30

Key Financial Metrics

Metric Value
Market Capitalization $35824M
Enterprise Value $39538M
Trailing P/E 17.56
Forward P/E 20.77
Trailing EV/EBITDA 10.85
Current Dividend Yield 148.05%
Dividend Growth Rate (5Y) 4.50%
Debt-to-Equity Ratio 0.21

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $22.91
Discounted Cash Flow (5Y) 25% $16.78
Dividend Discount Model (Multi-Stage) 20% $10.23
Dividend Discount Model (Stable) 15% $9.99
Earnings Power Value 10% $5.03
Weighted Average 100% $64.94

Investment Conclusion

Based on our comprehensive valuation analysis, eBay Inc's weighted average intrinsic value is $64.94, which is approximately 16.4% below the current market price of $77.71.

Key investment considerations:

  • Strong projected earnings growth (19% to 17% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.21)
  • Historical dividend growth of 4.50%

Given these factors, we believe eBay Inc is currently moderately overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.