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The Ratings Game: EBay says sales of sneakers and watches have accelerated, and trading cards are next

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EBay Inc. says it has seen growth accelerate in two key categories, sneakers and watches, and the online e-commerce company is preparing for the sales potential in a new category, trading cards.

“In Q1, sneakers valued above $100 grew at a triple digit rate once again,” said Jaime Iannone, chief executive of eBay
EBAY,
-10.03%
,
during the late Wednesday earnings call.

EBay expanded its sneaker authentication program in October 2020. EBay says it sells a pair of sneakers every 1.5 seconds. Analysts forecast that the market for the resale of sneakers and streetwear will reach $30 billion in 2030.

See: EBay steps up its sneaker game as resale business expected to hit $30 billion

Also: Nike launches refurbished sneaker program

EBay expanded its “certified refurbished” platform to include other categories, like power tools and laptops, in October as well.

EBay is also increasingly reaching out to Gen Z and millennial shoppers through social shopping programs like the eBay Sneaker Showdown and other digitally enabled channels.

Luxury watches grew from 16% in the fourth quarter to 38% in the first quarter.

“Our luxury watch buyers, like our sneaker enthusiasts, spend thousands of dollars on other categories across the platform,” Iannone said.

Since the beginning of the year, eBay says it has seen “explosive growth” in trading cards, with active buyers doubling and existing buyers purchasing more items at higher prices.

“To dramatically simplify selling, we recently launched image-based scanning for our top-selling trading cards, Iannone said. “In addition, we introduced a new low-cost tracked shipping service and aggressively marketed it to buyers on social and enthusiasts forums. We plan to launch more innovation for trading cards throughout the year.”

EBay’s first-quarter results exceeded expectations, however guidance fell short of Street expectations, sending shares down 10% in Thursday trading, the worst decline since 2019.

Also: EBay stock posts worst decline since October 2019 after outlook underwhelms

“[V]isibility into the following quarters as we lap COVID gains is limited as mobility increases,” wrote Wedbush analysts in a note, warning that the company may be entering “four quarters of negative year-over-year GMV growth.”

Wedbush downgraded eBay to neutral from outperform and cut its price target to $63 from $74.

And: Shopify’s stock gains after revenue more than doubles

“[T]he outlook on sustainability of GMV gains during COVID looks to be below our expectations, with more limited visibility as mobility increases.”

JPMorgan is also cautious about the road ahead. Analysts maintained their neutral stock rating and shaved $1 from the $65 price target.

“We are encouraged to see eBay find success in enthusiast categories, but we look for visibility into eBay’s ability to drive sustainable growth & upside to our estimates,” analysts said.

Truist Securities analysts note that eBay is facing an increasingly competitive “niche” category landscape, including Facebook Marketplace
FB,
+7.30%
,
Etsy Inc.
ETSY,
-1.21%
,
Poshmark Inc.
POSH,
-1.73%
,
and RealReal Inc.
REAL,
-0.59%

Truist rates eBay stock hold with a $68 price target, up $1.

Watch: How the pandemic changed investing habits for different generations

“The ongoing dislocation of traditional retail is benefiting e-commerce and multi-channel platforms including eBay and may help to offset challenges in returning to sustained GMV growth,” wrote Stifel analysts in a note.

Stifel rates eBay stock buy with a $75 price target, down from $80.

EBay stock is up 11.5% for the year to date while the S&P 500 index
SPX,
+0.68%

is up 12.2% for the period.

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