Digital retail marketplace eBay Inc (NASDAQ:EBAY) started 2018 off on the right foot. Thanks mostly to better-than-expected fourth-quarter numbers, eBay stock roared more than 20% higher in the first month of 2018 to all time highs of nearly $47.

But it has been a completely different story ever since.

EBAY has gradually slid lower ever since hitting that $47 peak. It is now under $40 and more than 13% off those all-time highs.

Will this weakness in eBay stock persist? I think so.

At $47, eBay stock got ahead of itself. Investors were pricing the company as if revenue growth and margin expansion were going to accelerate in the secular growth e-commerce market.

But that isn’t likely to happen.

Instead, EBAY will suffer from overcrowding in the e-commerce space. Revenue growth will come down. Margins won’t go up by much. Earnings growth will be much more tepid than the current stock price forecasts.

As such, eBay stock could fall further. How much further? I think this stock is worth, at most, $38.

Here’s a deeper look:

eBay Stock Will Suffer From Overcrowding

The big problem with EBAY is that while everyone wants to tout the company’s turnaround efforts, revenue growth is still stuck in this 6% to 9% range. That is pretty anemic for an e-commerce giant. Everyone else in this space, like Amazon.com, Inc. (NASDAQ:AMZN), Wayfair Inc(NYSE:W), Etsy Inc (NASDAQ:ETSY), JD.Com Inc(ADR) (NASDAQ:JD), and Alibaba Group Holding Ltd (NYSE:BABA), is reporting double-digit revenue growth.

Indeed, most of them have 30%-plus, 40%-plus, and 50%-plus growth rates. In context, then, EBAY’s sub-10% growth rate is a big red flag.

What is going on under the hood? It is getting really crowded in e-commerce. In addition to all the aforementioned e-commerce giants, traditional brick-and-mortar giants are also making huge pushes into the digital retail space.

Walmart Inc (NYSE:WMT) reported digital sales growth of 23% last quarter. Target Corporation (NYSE:TGT) reported digital sales growth of 29% last quarter. It will be tough for EBAY to accelerate growth and expand margins in an e-commerce space that is only getting more crowded and more competitive.

Moreover, the kids don’t like or use eBay, and that is a big problem for the company’s longevity. According to Piper Jaffray’s Spring 2018 Taking Stock With Teens Survey, eBay’s mind-share among teenagers fell to a record low 1.8%, down 120 basis points from 3% in the Fall 2017 survey.

Where are all the teens shopping? Amazon. And company-specific websites, like those from Nike Inc (NYSE:NKE) and American Eagle Outfitters (NYSE:AEO).

Granted, these are kids, and kids aren’t today’s big spenders. But they are tomorrow’s big spenders. And if tomorrow’s big spenders don’t like or use EBAY, that could be catastrophic for this already slow growth story.

eBay Stock Is Too Pricey

Because of the aforementioned competitive and youth popularity concerns, it really isn’t terribly likely that EBAY will accelerate its revenue growth rate any time soon. Over the next five years, EBAY’s revenue growth will likely run in the 5-10% range. At the midpoint, that would imply revenues of $13.7 billion in five years.

Also due to the aforementioned headwinds, it is equally unlikely that the company will expand its operating margins by much. Operating margins are already falling back some because revenue growth isn’t that big and the company is investing in new tech in order to sustain any growth. That is why operating margins are expected to be just 28% this year, versus above 30% two years ago.

At best, today’s big investments will phase out and EBAY will grow margins back to 30% in five years. A 30% operating margin on $13.7 billion in revenues implies operating profits of $4.1 billion in five years. Taking out $200 million for net interest expense, 21% for taxes, and dividing by a presumably reduced share count of 900 million, equates to $3.44 in earnings per share.

A market average 16-times forward multiple on those $3.44 earnings implies a four-year forward price target of roughly $55. Discounting that back by 10% per year, you arrive a present value of just under $38.

Bottom Line on eBay Stock

EBAY has already had its day in the sun. Now, eBay stock is correcting back to fair value territory.

Don’t buy until this correction is over, and material upside is supported by fundamentals.

As of this writing, Luke Lango was long AMZN, JD, BABA, and TGT.