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 (
) 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 (
), Wal-Mart (NYSE:WMT), Overstock (
), and Blue 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
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