eBay Can Rally Higher on Online Advertising Momentum
Key Points
Online ads represent almost 20% of eBay's revenue and offer much higher margins than marketplace transactions.
eBay's collectible items are driving growth as nostalgia continues to push up prices for iconic products.
eBay has multiple product categories delivering double-digit year-over-year revenue growth.
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eBay (NASDAQ: EBAY) has quietly delivered a 24.4% year-to-date rally, upstaging the S&P 500's 7.9% performance. eBay has become the go-to resource for collectors, and its recent acquisition of Depop aims to attract younger, fashion-forward consumers. These catalysts, combined with eBay's growing online advertising segment, can keep the rally going.
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Online advertising can accelerate profits
eBay reported $3.1 billion in first-quarter revenue, which was up by 19% year over year. The company generated $581 million in online ad revenue, which accounted for almost 20% of total revenue. eBay generated only $442 million in online ad revenue in Q1 2025, so the most recent results represent a 31.4% year-over-year improvement.
The high growth rate for online ads can support overall revenue acceleration, but it also sets the stage for higher profit margins. Online ads have higher margins than marketplace transactions, and while eBay didn't see a meaningful net income increase in Q1, the high-margin nature of eBay ads can show up in future quarters.
eBay has 136 million buyers, and the company defines a buyer as anyone who has purchased on eBay at least once in the previous 12 months. Online ads can increase eBay's average revenue per user and set the stage for future growth. The Depop acquisition can also introduce new customers to eBay or re-engage people who haven't bought products on eBay for more than a year.
Collectibles remain a strong draw
eBay's Q1 press release hinted that collectible items will continue to boost gross merchandise volume. Grand View Research projects a steady 6.9% compound annual growth rate (CAGR) for the collectibles market through 2033, and eBay has cemented its leadership in the industry.
eBay mentioned Pokémon multiple times in its press release when discussing results. A rare Pokémon card sold for a record-breaking $16.5 million on eBay's Goldin platform, and it was one of "several landmark sales" on Goldin, according to eBay's Q1 presentation.
The company also hosted a Pokémon Day auction with eBay Live, its interactive livestream shopping experience. eBay Live has generated more engagement and recently expanded into France, Italy, and Canada. The feature lets eBay and its sellers deeply integrate themselves into cultural moments and brand anniversaries that evoke nostalgia while promoting a wide range of products.
Motor vehicle parts and fashion also saw solid year-over-year gains. eBay is well-diversified across multiple product categories instead of relying exclusively on collectibles. This broad range of products gives the e-commerce stock more momentum and can justify an extended rally.
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Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends eBay. The Motley Fool has a disclosure policy.
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