eBay's Mobile Platform Could Drive 17% Upside to Stock Value

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As car and truck purchases over the original eBay mobile apps increased to 2,000 cars and 90,000 parts per week in Q1 2011, eBay ( EBAY ) decided to launch a dedicated eBay motors app to target this burgeoning market. We believe that the high value of autos and auto-parts along with healthy expected growth in U.S. auto market will help the eBay motors app to grow sales further. This momentum could provide significant upside to eBay's stock price. eBay competes with other e-commerce sites like Amazon ( AMZN ), Wal-Mart (NYSE:WMT), Overstock ( OSTK ), and Blue Nile ( NILE )

eBay Marketplaces constitutes around 45% of our $32.74 price estimate for eBay's stock . Our number currently implies a premium to market price.

Auto Purchase Via Mobile Device is a Growing Trend

The trend of purchasing autos and auto-parts through mobile devices is on a steep upward slope. eBay reported that globally, in Q1 2011, total vehicle sales transacted via mobile devices increased 160% year-on-year and total number of parts and accessories sold increased nearly 250% year-on-year. In Q1 2011 users purchased 2,000 cars and 90,000 parts and accessories per week via the original eBay mobile app. During the same period, the value of the 5 most expensive vehicles sold over smartphone ranged from $152,000 to $369,000. The increased value of autos and auto-parts will increase the average selling price of merchandise on eBay, which was about $65 in 2010.

Solid Growth in U.S. Vehicle Sales

The U.S. auto industry has recovered from the downturn in 2008 and 2009. U.S. vehicle sales totaled about 12 million in 2010, up 11% from 2009. In Q1 2011, U.S. vehicle sales increased by around 20% year-on-year. Growing industry demand should support an increased number of listings of autos and auto-parts on eBay.

Improved Customer Experience

The new eBay motors app should ease the process of searching for auto parts and be a significant upgrade to the customer experience. Customers will be able to scan a car's vehicle identification number and easily search parts and accessories that fit these cars. This will not only help the adoption of this app but also drive improvement in the listings-to-sales conversion rate on eBay.

Potential 17% Upside to Our Stock Price Estimate

In the scenario where average selling price of merchandise increases by 4% ever year, number of listings on eBay grows by 8% every year and listings-to-sales conversion rate improves by 3% in 2011 and by 0.5% thereafter, implied stock value of eBay would be about $38.40. This implies more than 17% upside to eBay's stock value  from our base case $32.74 price estimate .

You can drag the trend lines in the  modifiable charts above to see the impact of these trends on eBay's stock value.

See our full valuation analysis for eBay stock here



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: AMZN , EBAY , NILE , OSTK

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