1. eBay Inc. (NASDAQ:EBAY)
Gotham Asset Management’s Stake Value: $14,573,000
Percentage of Gotham Asset Management’s 13F Portfolio: 0.59%
Number of Hedge Fund Holders: 49
P/E Ratio as of December 22: 3.49
The best value stock from Joel Greenblatt’s Q3 portfolio is eBay Inc. (NASDAQ:EBAY), with the legendary value investor owning 209,168 eBay Inc. (NASDAQ:EBAY) shares, worth $14.57 million, representing 0.59% of his Q3 investments. eBay Inc. (NASDAQ:EBAY) is a California-based multinational e-commerce company that facilitates B2C and C2C sales transactions via its website.
A total of 49 hedge funds in the third quarter database of Insider Monkey reported owning stakes worth $2.09 billion in eBay Inc. (NASDAQ:EBAY). The largest company stakeholder from Q3 is Nicolai Tangen’s Ako Capital, with 7.35 million shares worth $512.5 million.
JPMorgan analyst Doug Anmuth reinstated coverage of eBay Inc. (NASDAQ:EBAY) on December 15 with a Neutral rating and a $70 price target, stating that eBay Inc. (NASDAQ:EBAY) has executed well to simplify its portfolio and improve margins but its product innovation efforts are just starting out, and the company cannot capitalize on that immediately.
In the third quarter earnings report, published on October 27, eBay Inc. (NASDAQ:EBAY) posted an EPS of $0.90, beating estimates by $0.02. Revenue for the quarter totaled $2.50 billion, exceeding estimates by $44.61 million.
Here is what Steel City Capital has to say about eBay Inc. (NASDAQ:EBAY) in its Q4 2020 investor letter:
“eBay (Long): EBAY continues to be a core holding in the Partnership’s long book despite not having any “sexy” attributes or unknown catalysts. I like EBAY because it checks the boxes of being both capital light and priced as a value stock (low multiple of free cash flow), factors which are attractive in a potentially inflationary environment.
In 3Q’20 the company printed $2.6 billion of revenue vs. guidance of $2.4 billion (a $200 million beat) while full year revenue guidance was taken up by $400 million, implying 4Q’20 would be higher by $200 million as well. Free cash flow from continuing ops was guided to $2.3 billion for the full year, slightly above the $2.0 billion the business regularly generated before getting a Covid/stimulus related boost.
EBAY will have about $4.6 billion of cash on hand at year end5 and should receive another $2.0 billion in after-tax proceeds this quarter related to the sale of its Classifieds portfolio6 . Additionally, the company will receive 540 million shares from Adevinta which are currently valued at ~$8.3 billion, and also holds a warrant to purchase a 5.0% stake in payment processor Adyen which was last valued at ~$775 million. Additional asset sales are also not out of the question7 . Backing everything out at today’s market cap of $38.2 billion gives a clean market cap for the core marketplace of $22.6 billion. At a minimum, I expect $2.0 billion of free cash flow in FY’21, with the potential for a higher figure to the extent the incoming administration is successful in cutting additional stimulus checks. By FY’22, free cash flow should ramp to $2.3 billion after incorporating a full year’s contribution from the managed payments initiative. This values EBAY at 9.6x free cash flow, or 11.7x excluding stock-based comp.”
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