85% Probability eBay goes higher this week

"Guess what? The world changes. eBay has defined e-commerce."

-Meg Whitman

Believe it or not, this month marks the 20th anniversary of eBay going live. While they may no longer be the darlings of the eCommerce world, investors are not complaining. The stock is up 479% since March of 2009 (about 75% annualized) and shares have proven to be resilient this year. The stock was up 20% before the recent market correction, and is still up 11% for the year and well ahead of the S&P 500 which is still down for the year. Is this a good time to buy?

85% Probability eBay will be above its current price at weeks end

Since going public in 1998, eBay has traded in a statistically similar way over a 1 month period 28 times. In 85.7% of the instances (24 of 28 times), eBay is up in the next week an average of 3.5%. If you look at the returns in each similar historical instance relative to the S&P 500 in the next week, the average return is still 2.1% and the stock outperforms 75% of the time.

The table below shows the returns in the next week of all 28 instances on an absolute basis. The poorest performer on the tail is from the internet bubble of 2000.

Looking at the historical return distributions, there is 85% probability eBay will be above the lower bound in the chart below, which is essentially at its current price:

Have a great week!