eBay Stock Downgraded As Tariff Worries Mount Ahead Of Q1 Earnings
Several analysts have downgraded and/or lowered price targets for eBay stock in the last week as concerns about tariff impacts mount ahead of Q1 earnings.
Bernstein dropped it's rating for eBay from outperform to market-perform and lowered its price target to $65 from $70, citing a "cloudy" short-term outlook due to the uncertain tariff situation and macroeconomic conditions amidst escalating trade war tensions with China.
“The operating environment for e-commerce has changed,” Bernstein wrote. “The data we track softened through Q1, and tariffs further exacerbate the risks.” China-sourced inventory remains a key concern, with Bernstein warning it could impact “GMV, product availability, and related ad spend.”
While CEO Jamie Iannone publicly shrugged off questions about competition from Shein and Temu, he quietly grew eBay's China business significantly in 2024, particularly in Motors Parts and Accessories which is one of eBay's largest categories responsible for over $10 Billion a year in GMV.
Liz Morton
Jefferies downgraded eBay in December due to similar concerns about possible headwinds to cross border trade from China as well as slowing ad revenue growth from eBay's Promoted Listings advertising offerings.
Liz Morton
Iannone has previously said much of eBay's China inventory is forward deployed with stock stored and shipped from US warehouses.
That may slightly delay the initial impact of executive orders that have increased tariffs on items from China to ~145%, but it will only be a temporary reprieve for eBay if there isn't a significant de-escalation and lower of tariffs in the very near future - once older forward deployed inventory is depleted, it will have to be replenished with stock subject to the current higher tariff rates.
Interestingly, eBay recently updated their Forward-Deployed Inventory policy, requiring sellers registered in a long list of locations to apply for an approval to ship items from an overseas warehouse - but notably China is not on the list.
eBay
Shippers had also received a temporary reprieve on the ending of the de minimis exemption, which allowed goods under $800 to be imported into the US duty free, last month but that is set to come to end an May 2nd for China and "as soon as systems are in place" for other countries as well.
Liz Morton
Arete Research, which downgraded eBay to a "sell" in January, sees the ending of de minimis as a major concern for eBay, Etsy, Shopify and other marketplaces that have significant exposure to sellers dropshipping from AliExpress or other China-based suppliers.
While the INFORM Consumers Act contained language that, in theory, should have cut down on certain kinds of dropshipping, there's little indication that those parts of the law are being strictly monitored or enforced or that they have measurably impacted the number of dropshippers on eBay or other marketplaces.
eBay also made policy changes last year blocking tracking numbers from Aquiline and Bluecare Express in an apparent effort to crack down on some dropshipping, but this move mostly targeted sellers who "dropship" by ordering items from Amazon to fulfill their eBay orders in violation of eBay's dropshipping policies.
Liz Morton
It's difficult to guess what eBay's actual exposure on China-based dropshipping may be, but it could be significant enough to make a material difference in GMV and revenue - especially since dropshippers currently may be likely to spend more than average on Promoted Listings advertising in order to increase their visibility amongst a sea of same/similar items flooding the marketplace but may lower that ad spend if increasing tariff costs make it price prohibitive.
Iannone has also sought to calm trade war fears by referencing the strength that eBay has in non-new in season, unique and collectible items and that buying second hand or refurbished can offer shoppers great value propositions in uncertain economic times.
He's sure to lean heavily on the Consumer to Consumer (C2C) efforts eBay has been undertaking, particularly in the UK where they introduced fee-free selling for private accounts in most categories in October 2024.
However, those C2C efforts have come with significant struggles as eBay works to remonetize those sales in other ways like delaying private seller payouts, requiring mandatory use of Simple Delivery managed shipping, and introducing a Buyer Protection Fee - all of which have received significant backlash from both buyers and sellers in the UK.
Liz Morton
And while used or refurbished items may offer value to shoppers compared to buying new, if the ongoing trade war sparks a full on recession, consumers are likely to pull back spending on any non-essential items and forego purchases altogether instead of bargain hunting on eBay.
Will eBay lower their guidance for the rest of the year in response to uncertain market conditions?
We'll find out when the company reports Q1 2025 earnings on April 30 at 2:30 PM Pacific/5:30 PM Eastern!
