Latest / Stock Picking with Fexingo: Individual Equities, Research, and Building a Concentrated Portfolio / How eBay Became a Surprise Value Stock in 2026
Transcript
- Lucas: eBay is not a stock that gets a lot of love at cocktail parties. I mean, it's the online garage sale from the 90s, right? But in 2026, eBay has quietly become one of the best-performing large-cap value stocks in the market. Luna: I've seen the numbers. It's up what, like 40 percent over the past two years? That's not a garage sale — that's a compounder. Lucas: Exactly. And I think the market has started to re-rate it because eBay did something that most legacy tech companies struggle with: it got focused. It stopped trying to be Amazon. It leaned into what it does best — peer to peer selling, especially in categories like collectibles, auto parts, and refurbished electronics. Luna: So they basically doubled down on the super-niche stuff that big-box ecommerce can't touch. Lucas: Right. And it's working. eBay's gross merchandise volume actually grew last quarter — not by a lot, but growth in a category where Amazon's GMV is decelerating is notable. But what really caught my attention is the financial engineering. eBay has been buying back stock aggressively. They retired about 10 percent of their shares in the last twelve months alone. Luna: Yeah, I saw that their diluted share count dropped from roughly 530 million to under 480 million over the past year. That's a massive reduction. Lucas: And the thing is, they can afford it. eBay generates enormous free cash flow — we're talking north of $1.8 billion annually, on about $2.5 billion in GAAP net income. Their free cash flow margin is something like 40 percent. That's better than most software companies. Luna: That's wild for a marketplace business. How are they doing that? Lucas: It comes down to their business model. eBay doesn't hold inventory, they don't build warehouses, they don't do last-mile delivery. They just connect buyers and sellers and take a cut. So their incremental margins are very high. And in recent years, they've been disciplined about costs — cutting headcount, simplifying their product lineup, killing off experiments like eBay Now. Luna: It's almost like the opposite of Amazon, which spends billions on fulfillment infrastructure and original content. eBay's model is lean by design. Lucas: Exactly. And that's what makes it a value investor's dream. It trades at roughly 15 times forward earnings, which is a discount to the broader market. And it's got a dividend yield of about 1.8 percent — not huge, but it's been growing. Plus the buybacks, which are effectively a tax-efficient dividend for shareholders. Luna: But isn't there a risk that they're just shrinking their way to prosperity? At some point, you need revenue growth to support the buybacks. Lucas: That's the key question. And I'd say eBay has a couple of growth levers. First, international. A big chunk of their revenue comes from outside the US, especially in markets like the UK, Germany, and Australia. Cross-border trade is growing. Second, they're investing in AI to improve search and recommendations — stuff like showing you a parts diagram for your car and suggesting the right replacement part from a seller. That drives conversion. Luna: Yeah, I saw they rolled out an AI tool that uses computer vision to help sellers list items faster. You just snap a photo, and it auto-generates the listing details. Lucas: Exactly. Little things that make the platform stickier. And then there's the collectibles boom. Trading cards, watches, sneakers, vintage fashion — those categories are growing fast. eBay has authentication services for high-value items, which builds trust. I think that's a durable moat. Luna: So you're basically saying eBay is a value play with a growth kicker. That sounds like the kind of thing Warren Buffett would love — if he could get past the fact that it's a tech stock. Lucas: Ha. Well, Berkshire actually owned eBay a few years ago through Ted Weschler or Todd Combs. They sold it. But the thesis today is even cleaner. Look, if our conversations on this show have helped you think about investing a little differently — maybe you looked at a stock like eBay and saw something you hadn't seen before — that's exactly the kind of thing that keeps us going. And honestly, if today's episode was worth a coffee to you, there's a link: buy me a coffee dot com slash fexingo. No pressure, just a way to keep this ad-free. Luna: Yeah, it really does make a difference. We don't run ads, so listener support is what keeps us independent. Lucas: Exactly. So back to eBay. The other thing I'd point out is that management has been very transparent about their capital allocation framework. They have a clear formula: invest in organic growth, maintain the dividend, buy back stock, and look for small tuck-in acquisitions. No big transformative deals. That discipline is rare. Luna: Right. And it's a big reason the stock has re-rated. The market is rewarding that predictability. Lucas: Now, there's a risk that the macro environment could hurt them. If consumer spending slows sharply, eBay's GMV could dip. But their take rate — the percentage they keep from each transaction — has been increasing as they push promoted listings and managed payments. So they might actually grow revenue even if GMV is flat. Luna: Interesting. So they have multiple levers to offset a slowdown. Lucas: Yeah. And I think that's why analysts have been quietly upgrading the stock. It's not a moonshot. It's a steady compounder with a nice margin of safety. For a concentrated portfolio, something like eBay can serve as the 'value anchor' — the stock that gives you income and downside protection while you wait for your growth names to work. Luna: I like that framing. It's almost like a bond proxy with a growth option attached. Lucas: Exactly. And if you look at its correlation to the broader market, it's actually lower than most tech names. So it provides some diversification within a portfolio that's heavy on high-beta stocks. Luna: One thing I'd add is that the bear case isn't hard to see. Etsy is a direct competitor in the handmade and vintage space, and Etsy has been investing heavily in marketing. Plus, Amazon's foray into luxury goods and second-hand items could encroach on eBay's turf. Lucas: Those are real risks. But I'd argue eBay's scale and liquidity are hard to replicate. When you want a rare vintage watch or a hard to find car part, eBay is often the only place with the listing. That network effect is sticky. Luna: Fair point. So what's the catalyst here? Is it just earnings growth, or is there something more immediate? Lucas: I think the catalyst is simply the market recognizing that eBay is not a dying relic. The narrative is shifting from 'eBay is decaying' to 'eBay is a cash machine.' And as that narrative gains traction, the multiple could expand from 15 times to maybe 18 or 20 times. Couple that with mid-single-digit earnings growth and aggressive buybacks, and you could see low-double-digit annual returns for the next few years. Luna: That's not bad for a 'boring' stock. Lucas: Not bad at all. And in a market where the S&P 500 is trading at over 22 times earnings, a 15-times multiple with a 40 percent free cash flow margin looks pretty compelling. Luna: Alright, I'm going to add eBay to my watchlist. Maybe even start a small position. Lucas: I think that's a smart move. Just make sure you keep an eye on their quarterly GMV trends and their take rate. If those hold up, the buybacks will do the rest. Luna: Definitely. And on that note, I think we've given listeners plenty to chew on. Lucas: Yeah. eBay is a reminder that sometimes the best value stocks are hiding in plain sight. They're not sexy, they don't make headlines, but they quietly compound your wealth year after year.