eBay stock is up 25% so far in 2024, more than doubling the year-to-date return of the S&P 500 index. The stock is still far below its 2021 all-time high, though, and yet to fully recover from its post-pandemic hangover. A quick look under the hood reveals that the development of the underlying business hardly corresponds to this year’s share price upside.
Sales and free cash flow growth has been anemic for years, and even the company itself expects GMV and revenue to decline slightly in Q2. In other words, the only thing the bulls can hope for is multiple expansion, which largely depends on market sentiment. Alas, the Elliott Wave chart below shows that the second half of 2024 may not resemble the first.
eBay ‘s weekly chart shows that its 1998 IPO was followed by an impulsive uptrend, marked I-II-III-IV-V, culminating at $81.19 on October 22, 2021. The theory states that a three-wave correction follows every impulse and that’s precisely what we think has been in progress since the end of wave V. But the decline from $81 to under $36 a share looks like a single wave – A.
This means that the following recovery to $54.59 so far should be marked as wave B. If this count is correct, wave C down has yet to occur. It is supposed to drag eBay stock below the bottom of wave A, putting targets near the support of wave IV around $27 within sight. From the current price of over $54, that’ll be a ~50% drop. What improves the bearish odds further is the fact that wave B looks like a textbook flat correction. Take a look below.
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Flat corrections consist of three waves with a 3-3-5 sub-structure. Here, the three waves are labeled (a)-(b)-(c). Waves (a) and (b) clearly have only three sub-waves a-b-c, while wave (c) is a five-wave impulse, marked 1-2-3-4-5. Once wave 5 of (c) is over, the entire wave B would also be complete and it would be time for a notable bearish reversal for the start of wave C to sub-$30. eBay stock had a good run in the first five months of 2024, but investors should not extrapolate it into H2. Instead, we think this is a good time for profit-taking.
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