5 Cheap Value Stocks To Buy According To Seth Klarman

3. eBay Inc. (NASDAQ:EBAY)

Baupost Group’s Stake Value: $1,045,471,000
Percent of Baupost Group’s 13F Portfolio: 8.48%
Number of Hedge Fund Holders: 39
P/E Ratio: 4.04

As of Q2 2021, Baupost Group owns over 14.8 million shares in eBay Inc. (NASDAQ:EBAY), valued at $1.04 billion. The company accounts for 8.48% of the hedge fund’s 13F portfolio.

This September, Baird lifted its price target on eBay Inc. (NASDAQ:EBAY) to $80, while keeping an ‘Outperform’ rating on the shares.

As of Q2 2021, 39 hedge funds tracked by Insider Monkey have positions in eBay Inc. (NASDAQ:EBAY), compared with 51 in the previous quarter. The total value of these stakes is over $3.12 billion. 

Steel City Capital mentioned eBay Inc. (NASDAQ:EBAY) in its Q4 2020 investor letter. Here is what the firm has to say: 

“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.”