3. eBay Inc. (NASDAQ:EBAY)
Klarman’s Stake Value: $1.04 billion
Percentage of Seth Klarman’s 13F Portfolio: 8.48%
Number of Hedge Fund Holders: 39
eBay Inc. (NASDAQ: EBAY) is an American multinational e-commerce company that facilitates consumer and business sales in over 190 markets globally. Ranked third on the list of the top 10 stock picks in Seth Klarman’s portfolio, eBay Inc. (NASDAQ:EBAY) has a market capitalization of $47.87 billion.
Seth Klarman’s Baupost Group currently holds 14.89 million shares of eBay Inc. (NASDAQ:EBAY), amounting to $1.04 in worth and accounting for 8.48% of the fund’s portfolio. At the end of the second quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth $3.1 billion in eBay Inc. (NASDAQ:EBAY), down from 51 in the preceding quarter worth $3.76 billion.
On August 11, eBay Inc. (NASDAQ:EBAY) issued its quarterly earnings report for the second quarter of 2021, with reported earnings at $0.99, beating estimates by $0.03. The company also reported revenues of $2.67 billion, crossing estimated revenues by $39.80 million.
Of the hedge funds being tracked by Insider Monkey, Ivy Lane Capital is a leading shareholder in eBay Inc. (NASDAQ:EBAY) with 191,000 shares worth $13.4 billion.
In its Q4 2020 Investor Letter, Steel City Capital highlighted a few stocks and eBay Inc. (NASDAQ:EBAY) is one of them. Here is what the fund said:
“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.”
