Can eBay Climb Higher?

With shares of eBay (NASDAQ:EBAY) trading around $58, is EBAY an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Ebay provides online platforms, tools, and services to help individuals and merchants with online and mobile commerce in the U.S. and around the world. Its marketplaces segment operates e-commerce platform eBay.com and vertical shopping sites. The company operates through three segments: Marketplaces, Payments, and GSI. Ultimately, through its tools and platforms, eBay assists individuals and merchants around the globe engage in online and mobile commerce.

EBay on Monday rejected activist investor Carl Icahn’s two nominees to its board, saying both were unqualified, and urged shareholders to vote against them at its next annual meeting. Icahn, who owns just over 2 percent of the e-commerce company, has been pressuring eBay for weeks to spin off its PayPal payments business. He has also repeatedly accused eBay of poor corporate governance. The billionaire nominated Icahn Enterprises LP employees Daniel Ninivaggi and Jonathan Christodoro, both of whom Icahn regularly nominates to boards. The chair of eBay’s corporate governance and nominating committee, Richard Schlosberg III, said the board considered both but rejected them because “neither nominee has relevant experience or expertise.”

EBay said since each Icahn nominee currently sits on four public company boards, they are not in compliance with eBay’s guidelines on “overboarding.” EBay founder and chair Pierre Omidyar in a statement urged shareholders to support the company’s slate, which includes chief executive John Donahoe. The company did not in its preliminary proxy statement set the date for its next annual shareholders meeting, which is expected to take place in the spring.

T = Technicals on the Stock Chart Are Strong

Ebay stock has seen positive progress in recent years. However, the stock is currently pulling back and may need time to stabilize. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Ebay is trading above its rising key averages which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Ebay options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Ebay options	28.69%	93%	90%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
April Options	Flat	Average
May Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Ebay’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Ebay look like and more importantly, how did the markets like these numbers?

	Hot Long Term Companies To Watch For 2015 2013 Q4	2013 Q3	2013 Q2	2013 Q1
Earnings Growth (Y-O-Y)	14.32%	16.36%	-7.55%	15.91%
Revenue Growth (Y-O-Y)	13.45%	14.34%	14.1%	14.37%
Earnings Reaction	0.97%	-3.99%	-6.72%	-5.84%

Ebay has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Ebay’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Ebay stock done relative to its peers, Amazon (NASDAQ:AMZN), Overstock (NASDAQ:OSTK), Mercadolibre (NASDAQ:MELI), and sector?

	Ebay	Amazon	Overstock	Mercadolibre	Sector
Year-to-Date Return	6.77%	-7.10%	-31.90%	-6.94%	-1.42%

Ebay has been a relative performance leader, year-to-date.

Conclusion

Ebay is an established company that has made a name for itself pioneering internet commerce. The company on Monday rejected activist investor Carl Icahn’s two nominees to its board. The stock has moved higher in recent years, but is currently pulling back. Over the last four quarters, earnings and revenues have been rising, which has left investors pleased. Relative to its peers and sector, eBay has been a relative year-to-date performance leader. Look for Ebay to OUTPERFORM.