Why eBay Stock Jumped 40% so far in 2021

What happened

eBay (NASDAQ: EBAY) shareholders outperformed a booming market in the first half of 2021, with shares jumping 40% compared to the 14.4% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

That rally built on an earlier market-beating performance for the online marketplace, which trounced indexes in 2020, too.

A young woman shopping online with a credit card in her hand.

Image source: Getty Images.

So what

Several things have gone right for eBay shareholders so far this year. A persistent demand spike for online commerce allowed sales volumes to soar in the first quarter, rising 24% through late March.

And eBay's marketplace is profiting more from those sales as the fees it charges sellers creep higher. As a result, Wall Street has been pleasantly surprised by its growth and profits thus far.

Now what

CEO Jamie Iannone and his team are predicting a growth slowdown ahead as the company laps some of the biggest growth spikes tied to the earlier phases of the pandemic last year. But eBay is still expecting to win market share in attractive niches, like sneakers and luxury watches, as the overall business expands and earnings rise.

Investor returns will be further amplified by eBay's aggressive cash-return policy that includes a meaty dividend and aggressive stock-repurchase spending. The marketplace's high margins give it room to boost both of these return categories in 2021 and beyond, even as growth slows from the soaring pace we've seen since early 2020.

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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends eBay and recommends the following options: short October 2021 $70 calls on eBay. The Motley Fool has a disclosure policy.

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

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