Is eBay a Buy at These Prices?

With shares of eBay (NASDAQ:EBAY) trading around $54, is EBAY an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Ebay provides online platforms, tools, and services to help individuals and merchants with online and mobile commerce in the U.S. and around the world. Its marketplaces segment operates e-commerce platform eBay.com, and vertical shopping sites. The company operates through three segments: Marketplaces, Payments, and GSI. Ultimately, through its tools and platforms, eBay assists individuals and merchants around the globe engage in online and mobile commerce.

In the last few weeks, eBay delivered a profit, but missed Wall Street's expectations for revenue. The revenue miss is a negative sign to shareholders seeking high growth from the company. Despite the recent hiccup, commerce continues to move online at an increasing rate, and companies like eBay are poised to see rising profits.

T = Technicals on the Stock Chart Are Strong

Ebay stock has been moving higher in recent years. However, the stock has tried a few times to test all-time high prices and continues to back-off from these key price levels. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, eBay is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of eBay options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
eBay Options	32.52%	76%	75%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts as compared to the last 30 and 90 trading days.

	Hot Undervalued Stocks For 2014 Put IV Skew	Call IV Skew
October Options	Flat	Average
November Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on eBay’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for eBay look like and more importantly, how did the markets like these numbers?

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	-7.55%	15.91%	-62.10%	21.62%
Revenue Growth (Y-O-Y)	14.10%	14.37%	18.14%	14.77%
Earnings Reaction	-6.72%	-5.84%	2.40%	5.45%

Ebay has seen mixed earnings and rising revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about eBay’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has eBay stock done relative to its peers, Amazon (NASDAQ:AMZN), Overstock (NASDAQ:OSTK), Mercadolibre (NASDAQ:MELI), and sector?

	eBay	Amazon	Overstock	Mercadolibre	Sector
Year-to-Date Return	6.85%	24.40%	99.16%	64.37%	39.83%

Ebay has been a poor relative performer, year-to-date.

Conclusion

Ebay is an established company that has made a name for itself pioneering internet commerce. The company recently issued an earnings report that didn't impress the markets. The stock has tested all-time high prices a few times in the last several months but has backed-off every time. Over the last four quarters, earnings have been mixed while revenues have risen, which has produced mixed feelings about the company among investors. Relative to its peers and sector, eBay has been a weak year-to-date performer. WAIT AND SEE what eBay does this coming quarter.