Morgan Stanley Names eBay Stock a Top Pick: Is The Comeback Real?

eBay is giving investors a reason to revisit its business. Morgan Stanley analyst Nathan Feather named it his top pick among the companies he covers, maintained an Overweight rating and raised his price target from $127 to $132 on October 12. 

The central argument is that live shopping can help sustain faster marketplace growth. eBay stock closed at $114.65, up 2.19%, after a sharper intraday rally.

eBay’s business improvement deserves attention. However, the investment case depends on how much lasting profit that growth produces and how much investors already pay for it. A stronger marketplace can still deliver modest stock returns if its valuation assumes too much success.

Why Did Morgan Stanley Name eBay Stock a Top Pick?

Morgan Stanley estimates that live commerce accounts for at least 40% of eBay’s FY2026 GMV growth and could add roughly four percentage points to annual GMV growth over FY2026-FY2030. These are analyst estimates reported by The Fly, rather than a contribution breakdown disclosed by eBay.

GMV, or gross merchandise volume, measures the value of transactions flowing through a marketplace. If a seller transacts $100 of merchandise, eBay does not record the entire amount as revenue. Its revenue comes primarily from marketplace fees and advertising; its GMV definition also includes shipping and taxes and does not deduct returns or cancellations.

Higher GMV can reflect a healthier marketplace, but shareholders benefit only when eBay converts that activity into profitable revenue and cash.

Also, “40% of growth” does not mean “40% of all sales.” A smaller, rapidly expanding service can account for a large share of the increase in transactions without dominating the overall business.

Morgan Stanley’s thesis is compelling because it offers an explanation for the acceleration. The question investors must test is whether live shopping adds spending and repeat activity across eBay, or mainly shifts existing transactions into a different format.

Is eBay’s Marketplace Business Actually Getting Stronger?

The latest reported quarter is Q2 2026, ended June 30.

Source: eBay Q2 2026 earnings release. Prior-year earnings figures reflect the company’s recast comparative financials.

The clearest evidence is underlying transaction growth. Organic GMV growth, excluding currency effects, rose from 4% in Q2 2025 to 14% in both Q1 and Q2 2026. This reduces the likelihood that the improvement is simply an acquisition or exchange-rate effect.

There is an important qualification. Active buyers rose approximately 2% year over year, considerably less than transaction value.

That suggests increased activity or spending within the existing customer base matters more than a surge in new customers. It does not establish whether transaction frequency, product prices or category mix contributed most.

This can still be valuable growth. Getting an existing collector to transact more frequently may be more economical than continually paying to attract new customers. But sustained improvement needs repeat spending and a healthy supply of desirable products, rather than dependence on occasional expensive transactions.

The verdict from these numbers is reasonably clear: eBay has stronger operating momentum. Calling it a permanently transformed business would require more evidence.

How Could eBay Live Make the Marketplace More Valuable?

eBay Live lets sellers showcase products and transact through livestreams. For a collector, the attraction is understandable: see the item, hear the seller explain it, ask questions and participate while other enthusiasts are watching.

eBay reported that Live GMV grew roughly eightfold year over year in Q2. The growth rate alone does not reveal its absolute size or standalone profitability.

The more interesting evidence concerns spending beyond the livestream. In its earnings presentation, eBay said first-time Live buyers concentrated in collectibles spent about 70% more across eBay than a comparable synthetic control group. Around half of the incremental spending occurred outside Live events. 

If that pattern persists, Live could improve the entire marketplace. Someone discovers a seller during a stream, returns to browse their other listings and later transacts in another category. Sellers with better turnover may also have more money available to replenish inventory.

Consider a hypothetical reseller with $1,000 tied up in stock. If that inventory turns over once a month, it supports $12,000 of annual transactions. Turning it over twice a month could support $24,000 with the same initial inventory capital, assuming sufficient demand, replenishment and unchanged prices.

This is an illustration, not an estimate of eBay’s actual results. It shows why transaction speed can matter as much as the number of listings.

The test is incrementality. If Live simply moves a transaction that would have occurred through a normal listing, eBay gains a new interface but little extra economic value. If it attracts additional spending, improves retention and helps sellers replenish products faster, the business becomes more useful to both sides.

Trust matters as much as entertainment

For used and collectible products, uncertainty about authenticity and condition can prevent a transaction. eBay has extended its authentication infrastructure, including an August rollout for eligible collectible coins priced at $500 or more, with physical inspection by PCGS.

This is central to the strategy. A livestream may attract attention, but buyers need confidence that the delivered item matches what they saw. Authentication, reliable descriptions and dispute handling help convert interest into completed transactions.

Those services also cost money. Investors should assess whether the spending produces better retention and fewer costly disputes over time.

Can Advertising and Depop Strengthen eBay’s Growth?

Advertising gives eBay another way to earn revenue from marketplace activity. Q2 advertising revenue totalled $596 million, compared with $482 million a year earlier. eBay’s filing says first-party advertising growth benefited from adoption and attribution changes that increased monetisation.

This makes the interpretation more nuanced than “more shoppers created more advertising revenue.” Some improvement comes from how eBay charges for and attributes advertising, alongside demand.

Advertising can be attractive when sellers willingly pay because promoted listings help them make profitable sales. It becomes less durable if sellers feel they must spend more merely to preserve their visibility.

The strongest outcome would combine rising transactions with advertising that improves seller economics. The weaker outcome would involve higher platform revenue while sellers face worsening margins and eventually move inventory elsewhere.

Depop adds a younger audience, with a near-term earnings cost

Depop reported approximately $1 billion of gross merchandise sales in 2025 and seven million active buyers at year-end. Nearly 90% of those buyers were under 34. These figures were disclosed when the acquisition was announced; Depop’s historical GMS definition should not be treated as identical to eBay’s GMV definition.

The deal closed on July 30. The announced price was $1.2 billion before adjustments; eBay disclosed an initial cash payment of $1.4 billion, including preliminary adjustments.

Strategically, Depop gives eBay a route to younger fashion customers without needing to persuade them to adopt the main eBay experience immediately. Financially, the distinction between acquired growth and underlying improvement becomes more important from Q3 onward.

Management expects Depop to add about 2.5 percentage points to Q3 consolidated currency-neutral GMV growth. It expects Depop, including synergies, to become accretive to adjusted operating income in 2028. That refers to operating income, not a promise of immediate EPS accretion.

Depop therefore strengthens the strategic opportunity while adding execution risk. More sales can appear in the consolidated accounts before the acquisition strengthens profits.

Why Do Analysts Disagree About eBay’s Earnings Outlook?

On the same day Morgan Stanley raised its target, Wells Fargo lowered its target to $91 from $92 and retained an Underweight rating. Its concern is that investment in growth opportunities and competition from Vinted could limit earnings growth.

The disagreement is worth studying because both views can recognise marketplace progress.

Sources: The Fly via TipRanks; Benzinga for Wells Fargo analyst identification; Yahoo Finance for closing price. Percentage differences are calculated, exclude dividends and are not expected returns. This is a comparison of two fresh calls, not the full analyst consensus.

Morgan Stanley’s case depends on growth lasting long enough to support stronger earnings. Wells Fargo questions how much investment is needed to defend and expand that growth.

The financial relationship is simple:

Operating profit = revenue × operating margin

In a hypothetical example, revenue rising 10% while the margin falls from 28% to 26% produces only about 2.1% operating-profit growth:

1.10 × (26 ÷ 28) − 1 = 2.1%

This is not a forecast. It explains how strong sales growth and disappointing profit growth can coexist.

Management’s Q3 guidance illustrates that tension. It projected revenue of 3.07-3.12 billion and adjusted EPS of 1.36-1.42. It also guided to organic, currency-neutral GMV growth of 7%-9% and an adjusted operating margin of 25.1%-25.6%. 

The relevant question is whether today’s spending creates sufficient future earnings to compensate shareholders for accepting slower profit growth now.

Is eBay Stock’s Valuation Attractive After the Rally?

A price target becomes useful when investors examine the earnings assumptions behind it.

Wells Fargo’s reported 2027 adjusted EPS forecast is $6.17, roughly 8% below the Street estimate referenced in its note. At $114.65, that represents about 18.6 times Wells Fargo’s forecast earnings. It is a valuation using one analyst’s projection, rather than eBay’s reported P/E or a verified current consensus multiple.

The reported 8% gap implies a Street figure of approximately $6.71, although rounding means this is only a reconstruction of the note’s reference point.

The following sensitivity analysis shows how earnings and valuation together affect the stock:

Source: Author calculations. The first EPS input is Wells Fargo’s reported forecast; $6.70 approximates the Street reference implied by that report; $7.20 and all P/E multiples are illustrative assumptions. These are neither price forecasts nor probabilities. Dividends, taxes, costs and currency effects are excluded.

The middle scenario makes an important point: earnings can improve without producing a large share-price gain. Investors who pay for a successful turnaround need that turnaround to exceed, or at least sustain, the expectations already embedded in the valuation.

Likewise, the downside scenario does not require the marketplace to collapse. Slower profit growth combined with a lower earnings multiple can be enough.

eBay deserves serious examination as a recovering marketplace. At this price, however, the thesis needs durable earnings delivery. The analyst endorsement alone does not establish a compelling margin of safety.

Check cash generation and the effect of share repurchases

eBay generated $326 million of free cash flow in Q2. It repurchased $310 million of shares and paid $138 million in dividends during the quarter.

A single quarter is insufficient to judge whether shareholder distributions are sustainable. Working-capital movements and investment timing can affect cash flow, so the better check is cash generation over several quarters.

Repurchases can support EPS by reducing the share count. That is useful, but investors should still examine total profit, cash generation and dilution from employee equity compensation.

Adjusted earnings also exclude costs that GAAP earnings include. eBay’s Q2 reconciliation included $188 million of stock-based compensation and related employer payroll taxes. Share awards can dilute ownership even though the accounting expense does not involve an immediate cash payment.

What Should Investors Watch Next?

Five signals will help distinguish lasting improvement from a promising phase:

1. Organic GMV growth: Track the underlying marketplace separately from Depop and currency effects.
2. Live’s contribution: Look for absolute transaction scale, repeat activity and incremental spending beyond livestreams.
3. Seller economics: Assess whether fees, advertising costs and service quality make eBay attractive for sellers to keep using.
4. Profit conversion: Compare revenue growth with operating income, margins and cash flow over several quarters.
5. Depop execution: Monitor whether the younger audience and fashion opportunity translate into progress toward management’s profitability expectations.

There is also a separate corporate-development consideration. eBay rejected GameStop’s unsolicited proposal in May, citing concerns including financing uncertainty and the proposed combination’s risks. A rejected, non-binding proposal is not an assured transaction or a guaranteed floor beneath the share price.

Does eBay Deserve Consideration as a Stronger Marketplace?

Yes, eBay merits closer attention because the case now has identifiable operating drivers. Underlying transaction growth, live shopping and efforts to improve trust give investors something concrete to evaluate.

The strongest thesis is that these improvements make eBay more useful to customers and sellers, supporting repeat activity and profitable growth. The main risk is that competition and reinvestment consume enough of that growth to leave earnings below expectations.

Our assessment is positive on the business direction and conditional on the stock’s valuation. eBay can justify sustained investor interest if underlying growth remains healthy and investment produces better profit and cash generation over time. If marketplace activity rises while earnings disappoint, the current optimism becomes harder to support.

Morgan Stanley’s call is a useful starting point. The deciding evidence will be the earnings and cash that eBay generates from its stronger marketplace.