By Sam Boughedda
Morgan Stanley analyst Lauren Schenk assumed coverage of eBay (NASDAQ:EBAY) with an Underweight rating and a 'Street Low' $36 price target on Thursday, sending its stock more than 2% lower.
The analyst sees downside to second-half and out-year estimates.
Morgan Stanley's new bottom-up analysis sees the online apparel resale market at $45 billion, growing more than 10% per year. While single verticals have driven the industry growth over the last decade, we think consolidation is the future, said Schenk.
"The resale apparel industry has been an area of increasing investor focus with the recent IPOs of Poshmark (NASDAQ:POSH), ThredUp (NASDAQ:TDUP), RealReal (NASDAQ:REAL), and Etsy's (NASDAQ:ETSY) acquisition of depop, but limited work has been done to size it given lack of data and visibility into the private market. We introduce a new bottom-up analysis derived from analyzing public company data, private company disclosures, and web traffic data across more than 70 resale companies," said the analyst.
Morgan Stanley sees continued share losses driving below consensus top-line results and margin pressure.
"We estimate EBAY lost >500 bps of market share in 2021, which we expect to continue as new entrants continue to take share. EBAY is attempting to compete with its 'focus categories' strategy, targeting most of the verticals these niche players have emerged; however, we are concerned that by investing in individual category experiences, EBAY is putting resources behind less scalable opportunities that will require reinvestment as vertical players innovate, leading to lower operating margins over time."