EBay: Painful but Necessary Layoffs Should Prop Up 2024 Margins as Demand Recovery Remains Sluggish

Narrow-moat eBay's layoffs don't look likely to alter its strategic course and should prove slightly accretive to our $49 intrinsic valuation. The firm announced its intention to cut 1,000 roles across the organization, or roughly 9% of its workforce, following similar moves by wide-moat Etsy, no-moat Wayfair, and no-moat Macy's. Cost savings weren't quantified and no high-level executive departures were disclosed, but we estimate based on expected severance costs of $90 million-$110 million a savings run-rate of about $200 million per year—or roughly 2% of our projected net sales for 2024. That rests on the company's official severance guidelines of 50% of salary, 50% of bonus, and 6 times (health) premium payments as disclosed in the firm's most recent annual filing for non-C-suite- and senior vice president-level employees. Shares initially popped on the news but have since given up most of their gains, yet continue to look attractive at current prices.