eBay Inc.EBAYNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $59.38 per share(market-calibrated)

-33.8%

Upside to Fair Value

Current

$89.63

Pure Model

$56.54

Fair Value

$59.38

Bull Case

$71.14

Bear Case

$42.88

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

6.86%

Calibrated Growth

3.97%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $56.54.

What's Driving This Ratingfor EBAY

↓

CapEx normalizing toward maintenance

Historical CapEx is 4.20% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$34M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 15.88% — below the sector mature average of 20.51%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.7B (15.88% margin).

→

Moderate revenue growth

Analyst consensus projects 7.88% revenue growth, fading to 3.00% by Year 10. Revenue reaches $17.0B (vs $11.1B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $41.95/share (15.9x terminal FCF) while exit multiple gives $71.14/share (31.1x terminal FCF). The 20x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $89.63, the market implies 6.86% perpetual growth — 386bps above the model's 3.00%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 64.25% indicates efficient cash generation. FCF reaches $2.1B by Year 10 (12.61% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.37

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.67%

Cost of Debt

Pre-tax Cost of Debt3.45%

Tax Rate13.48%

After-tax Cost of Debt2.98%

Equity Weight (E/V)84.57%

Debt Weight (D/V)15.43%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (84.57% × 10.67%) + (15.43% × 2.98%)

= 9.48%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$12.0B	$13.1B	$14.3B	$15.4B	$17.0B
EBIT	$1.9B	$2.1B	$2.3B	$2.4B	$2.7B
Tax	$256M	$280M	$305M	$330M	$363M
NOPAT	$1.6B	$1.8B	$2.0B	$2.1B	$2.3B
+ Depreciation	$448M	$489M	$534M	$576M	$635M
- Capex	$503M	$543M	$586M	$626M	$678M
- Δ NWC	$262M	$158M	$178M	$169M	$148M
Free Cash Flow	$1.3B	$1.6B	$1.7B	$1.9B	$2.1B
Discount Factor	0.913	0.762	0.636	0.530	0.404
Present Value	$1.2B	$1.2B	$1.1B	$1.0B	$864M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.1B

Terminal Growth Rate3.00%

WACC9.48%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$34.0B

PV of Terminal Value$13.7B

Exit Multiple Method

Year 10 EBITDA$3.3B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$66.5B

PV of Terminal Value$26.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$10.7B

PV of Terminal Value$13.7B

Enterprise Value$24.4B

(-) Net Debt$5.5B

Equity Value$18.9B

Shares Outstanding451M

Price per Share$41.95

Exit Multiple Method

PV of Projected FCFs$10.7B

PV of Terminal Value$26.9B

Enterprise Value$37.6B

(-) Net Debt$5.5B

Equity Value$32.1B

Shares Outstanding451M

Price per Share$71.14

Pure Model Fair Value

$56.54

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
7.48%	$71.19	$73.46	$76.23	$79.69	$84.15
8.48%	$61.87	$63.34	$65.07	$67.16	$69.70
9.48%	$54.38	$55.39	$56.54	$57.90	$59.49
10.48%	$48.17	$48.89	$49.69	$50.62	$51.69
11.48%	$42.90	$43.42	$44.01	$44.66	$45.41

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$42.88

-52.2% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.71

Base Case

$56.54

-36.9% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.37

Bull Case

$71.14

-20.6% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.17

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth7.88%

Year 3 Revenue Growth4.19%

Year 5 Revenue Growth4.34%

Year 7 Revenue Growth3.81%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin15.88%

Terminal EBIT Margin20.51%

Tax Rate13.48%

Historical Capex / Rev4.20%

Terminal Capex / Rev4.00%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Cyclical sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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