The Agent Era, eBay and Etsy Advantages May Be Underestimated

Overview

The core viewpoint of this Morgan Stanley report is: As AI agentic shopping shifts from keyword search to interactive personal shopping assistants, the e-commerce landscape will undergo a new paradigm shift. In this context, the market's positioning of eBay and Etsy suffers from systemic undervaluation. The report conducts a deep analysis of both companies using its proprietary '5I Framework' (Inventory, Infrastructure, Innovation, Incrementality, Income Statement Impact), constructing bull and bear scenarios for each respectively. The conclusion is: eBay, with its highly unique non-standard inventory, is an underestimated potential winner with structural advantages; while Etsy faces long-term risks of disintermediation by horizontal AI agents, its mid-term opportunity to enhance purchase frequency and conversion through in-site AI assistants is overlooked by the market.

Core views

eBay: Inventory Moat Constitutes Undervalued Advantage in Agent Era. The report argues that eBay, traditionally seen as a perpetual loser of market share, masks its unique advantages in the agent shopping era. First, eBay holds about 2.5 billion product listings, with approximately 90% being second-hand or off-season items, highly non-standard and unique. Agentic AI can match such 'long-tail' products more precisely than traditional search, directly driving GMV growth. Second, large quantities of second-hand and C2C items provide significant price advantages, making it easier to achieve high rankings in comparison results among horizontal shopping agents. Finally, agentic AI significantly streamlines listing processes, reducing seller friction while stimulating supply and demand. The report notes that eBay's AI 'Magic Listing' tool has reduced user listing time by over 25%, bringing double-digit per-user GMV increases. Strong fundamentals support its status as the 'Preferred SMID e-commerce', with approximately 12% currency-neutral GMV growth in the first half of 2026 far exceeding market expectations, viewed as structural rather than temporary. Etsy: Clear Long-term Risks, But Mid-term Opportunities More Appealing. Etsy's long-term risk lies in its core value aggregating demand for 'specialty goods'. If consumers begin shopping journeys with horizontal AI agents like Google Gemini, these agents may replace Etsy as the new aggregator. Coupled with Etsy's 25% commission rate (highest for pure third-party platforms) and the fact that over 75% of its best-selling sellers sell elsewhere simultaneously, sellers have strong incentives to channel traffic to lower-cost channels. However, the report argues the market ignores Etsy's path to becoming an agent winner in the coming years. Many shoppers carry vague intent (e.g., 'gift for mom') rather than precise terms; traditional keyword searches work poorly here, while conversational agent AI solves this pain point perfectly, boosting conversion rates and purchase frequency. The report calculates that for every $5 increase in GMS per buyer, Etsy's total GMS rises by 4%, whereas market consensus is only a 3% CAGR over 4 years, so any slight frequency increase is enough to deliver earnings surprises.

Analysis framework

Morgan Stanley adopts a dual-track research method of 'Framework Analysis + Scenario Quantification'. First, the institution built the '5I Framework' to evaluate e-commerce competitiveness in the agent era: Inventory (looks at uniqueness and price advantage); Infrastructure (looks at physical and digital fulfillment capabilities); Innovation (looks at AI tool iteration speed); Incrementality (looks at ability to gain new demand from agent channels); Income Statement Impact (looks at sensitivity of agent model to margins). The team scored and qualitatively compared eBay and Etsy's various capabilities based on this framework. Second, based on qualitative judgments, the report constructed three financial models (Bull, Baseline, Bear) for both companies through 2030, quantifying elasticity of key variables like GMV, commission rates, and profit margins under different scenarios, ultimately deriving specific impact magnitudes on EBITDA. On valuation, eBay uses DCF valuation (7.5% WACC, 2.0% terminal growth rate), and Etsy also uses DCF (8.1% WACC, 1.0% terminal growth rate). The ingenuity of this analytical approach is that it does not stop at 'good or bad' qualitative conclusions, but breaks down the impact of technological change on business models into quantifiable, trackable financial metrics, allowing investors to clearly see specific paths under optimistic and pessimistic scenarios.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply and Demand Framework

  Judging GMV growth potential through bidirectional drivers of supply side (e.g., eBay reducing seller listing friction) and demand side (e.g., agentic AI achieving more precise matching).

  This report views agent commerce as a rare technological变革 affecting both supply and demand sides simultaneously. For eBay, it adds supply via AI tools (easier listing) while improving demand matching efficiency via agent search.

• Competition and Strategy FrameworkMoat / competitive advantage

  Analyzing structural barriers resisting competition, such as eBay's approximately 90% unique non-standard inventory constituting its core moat.

  The report posits that in the agentic AI era, the more unique a product and the harder it is to compare prices, the deeper the platform moat. eBay's second-hand and off-season inventory is hard to find on other platforms, which is the source of its long-term competitive advantage.

• Valuation MethodologyDCF Cash Flow Discounting

  Assessing intrinsic value by discounting expected future cash flows to current point using a certain discount rate.

  Target prices for both eBay and Etsy are based on DCF models, setting different WACC and terminal growth rates to reflect their distinct risk profiles and growth prospects.

• Company Fundamentals and Financial FrameworkOperating/Financial Leverage Analysis

  Measuring how revenue growth translates to profit growth; higher fixed cost ratio means larger profit elasticity from revenue growth.

  The report analyzes how eBay and Etsy improve margins when agent GMV grows through operating leverage and marketing leverage. For example, in Etsy's bull scenario, marketing expense ratio decreases due to GMV growth, amplifying profit growth.

• Valuation MethodologyPE/PEG valuation

  Price-Earnings Ratio valuation method, commonly used to compare relative valuation levels of companies within the same industry to judge pricing of growth expectations.

  The report points out that eBay's current 16x expected P/E, if recognized by the market as an agent winner, has potential to expand to over 20x common in mature e-commerce platforms, representing a relative valuation comparison logic.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• eBay Inc (EBAY.US)

  Benefits from agent commerce. Its vast pool of non-standard, low-price inventory represents 'long-tail' products that agentic AI matches best, viewed as a structural winner.

  Strengths

  Highly unique inventory (approx. 90% non-standard), clear price advantage, fast AI innovation iteration, strong fundamental GMV growth.

  Weaknesses

  Lacks own fulfillment network, delivery speed slower than competitors, potentially highlighted in agent comparisons.

  Comparison

  Compared to Etsy, eBay's inventory moat is deeper, innovation speed faster, overall performance better in 5I Framework.

  Risks

  If agent AI highlights delivery speed, eBay's fulfillment disadvantage may be amplified; if sellers switch to other platforms, it may disrupt its supply flywheel.

• Etsy Inc (ETSY.N)

  Mid-term opportunities coexist with long-term risks. Agentic AI can solve its 'vague intent search' problem, increasing conversion, but long-term may be replaced by horizontal agents.

  Strengths

  Brand recognition in 'specialty goods' sector, possesses many active and churned buyers, first partner for external agent platforms.

  Weaknesses

  High commission rate (approx. 25%) incentivizes seller exodus, in-site inventory not exclusive, low purchase frequency, high buyer churn.

  Comparison

  In 5I Framework, Etsy's inventory and infrastructure dimensions are weaker than eBay, but incrementality (TAM penetration) and income statement elasticity are superior.

  Risks

  Long-term faces disintermediation risk from horizontal agents, high commission rates may be compressed, ad revenue may suffer from traffic migration.

Key data

• eBay Inventory Uniqueness~90%Approximately 90% of products are second-hand or off-season new items, highly non-standard and unique
• eBay Bull Case Agent 2030 EBITDA Increase+30%Relative to baseline, GMV up 26%, EBITDA up 30%
• eBay Bear Case Agent 2030 EBITDA Decline-26%Relative to baseline, GMV down 8%, EBITDA down 26%
• Etsy Bull Case Agent 2030 EBITDA Increase+40%Relative to baseline, GMV up 29%, EBITDA up 40% to $1.22 billion
• Etsy Bear Case Agent 2030 EBITDA Decline-41%Relative to baseline, GMV down 11%, EBITDA down 41%
• Etsy Per Buyer GMS Elasticity$5 => +4%For every $5 increase in GMS per buyer, Etsy total GMS will rise 4%

Impact & implications

The report argues that agent commerce will accelerate e-commerce penetration rate increases and trigger severe reshuffling of market share. For eBay, if its unique inventory advantages are fully exploited by agentic AI, it could achieve sustainable mid-to-high single digit even double-digit GMV growth, and drive valuation multiples from current 16x to 20x+, making it the preferred target among small-to-mid cap e-commerce stocks. For Etsy, the next few years are a critical window. If the company can successfully create excellent agent shopping experiences in-site first, solving the long-term pain point of low purchase frequency, it may welcome accelerated performance and valuation repair. However, in the long run, if horizontal agents (like Gemini) become mainstream entry points, Etsy's aggregator value will face fundamental challenges; this risk, though not fully realized, will continue to suppress its valuation multiples.

Risks

• Adoption speed of agent commerce falls short of expectations, or improvement to consumer experience is limited, leading to low return on investment.
• Etsy faces long-term risk of being replaced by horizontal AI agents (such as Gemini) in its aggregator role, difficult to falsify, continuing to suppress valuation.
• eBay's delivery speed disadvantage may be amplified in agent comparisons, leading to market share loss.
• If off-platform agent sales占比 is too high, it will increase platform marketing expenses, creating pressure on eBay and Etsy margins.

What to watch

• User adoption rates, conversion rates, and GMV impact of eBay and Etsy's agentic AI features (such as in-site conversational search).
• Penetration rate changes of horizontal AI agents (such as Google Gemini, Microsoft Copilot) in e-commerce domain and impact on platform traffic.
• Trends in Etsy's GMS per buyer and purchase frequency, which are key to validating the mid-term logic.
• Sustained contribution of eBay's 'Magic Listing' and other AI tools to seller growth and GMV.