eBay Downgraded by Citizens on Rising Depop Costs, Vinted Competition

Citizens has downgraded eBay (NASDAQ: EBAY) to Market Perform from Market Outperform, concluding that the stock's risk-reward profile has become more balanced. The brokerage cited escalating competition in the online resale market and the significant investments required for its Depop subsidiary as key factors likely to weigh on future profitability.

Competitive Pressures Mount

The downgrade reflects growing concerns over the competitive landscape, particularly the aggressive U.S. expansion of rival secondhand marketplace Vinted. According to the Citizens report, Vinted has substantially increased its marketing efforts, creating a more challenging environment for eBay's Depop platform.

Key competitive indicators noted by the brokerage include:

• Vinted's U.S. paid search spending surged from approximately $16,000 in February to $236,000 in June.
• Vinted has climbed to fifth place in Apple's App Store rankings, ahead of Depop, which ranked ninth.

Depop Investment to Weigh on Margins

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Citizens analysts believe this heightened competition will force eBay to ramp up marketing expenditures for Depop, potentially eroding margins. The brokerage projects that Depop's marketing spend could exceed $250 million in 2026, a sharp increase from an estimated $119 million in 2025, after the platform's marketing expense already hit $42 million in the first quarter.

The report suggests that current consensus earnings estimates for 2027 may not fully account for this higher level of investment. Citizens also noted that eBay's final acquisition cost for Depop was approximately $1.4 billion, above the initially announced $1.2 billion, which it believes partly reflects investments made to keep the platform competitive.

Valuation and Outlook

While Citizens expects eBay's core marketplace business to remain resilient, particularly in collectibles, the increased spending on Depop clouds the overall earnings outlook. The firm stated that with eBay shares trading at about 21 times its 2027 GAAP earnings estimate, the stock appears fairly valued relative to its marketplace peers.

This valuation, combined with the profitability headwinds from Depop and Vinted, prompted Citizens to lower its rating, signaling a more cautious stance on the stock's near-term potential.