eBay Inc. (EBAY) sold off 3.1% after last week’s Q2 2020 earnings report, despite beating estimates and guiding Q3 and fiscal year above already-aggressive consensus. The stock has since regained those losses but dwindling volume lowers odds it will challenge the July 13th all-time high at 61.06, at least in the short-term. The apathetic tape also indicates that overbought technical readings are taking hold, raising odds for a long-overdue downturn.
eBay Takes Market Share From Competitors
The e-commerce giant has booked impressive market share gains in the digital retail space as a result of the COVID-19 pandemic. Investors and traders have taken note, more than doubling the stock price since the March low while posting a 57% return in 2020. These outsized gains have raised legitimate doubts about valuation while lifting relative strength oscillators into the most overbought levels in the company’s 22-year public history.
In addition to growing technical challenges, eBay got into hot water in June after the U.S. Attorney’s office in Massachusetts indicted former employees for an alleged cyberstalking campaign that targeted the publisher and editor of a newsletter who wrote critical comments. Early evidence suggests that senior executives were involved in the diabolical decision-making, raising the potential for bearish headlines when testimony is taken later this year.
Wall Street And Technical Outlook
Wall Street rates eBay as a ‘Moderate Buy’, based upon 11 ‘Buy’, 16 ‘Hold’, and 1 ‘Sell’ recommendation. That’s positively bearish compared to other e-commerce plays, suggesting that many analysts think the company is now overvalued. Price targets currently range from a low of $52 to a street-high $82 while the stock is trading $6 below the median $62 target. This placement indicates that price could add additional points with ease, despite growing headwinds.
Technically speaking, eBay has fired on all cylinders since breaking out above 2018 resistance at 46.99 in June. The rally has added 10 points since that time while accumulation readings continue to support higher prices. However, a distribution wave that started in July may be picking up steam, perhaps setting the stage for an intermediate correction that offers a low-risk buying opportunity near the breakout level.