I’ve been a big bear on e-retail marketplace eBay (NASDAQ:EBAY) for a long time.

Back in September 2017, when EBAY stock was on fire and powering toward $40, I said that the rally was overdone and that eBay was not the turnaround story Wall Street was pumping it up to be. Then, in March 2018 when eBay stock was peaking around $45, I said that the stock had reached its peak and was due for a major correction.

Once that correction came, I warned in April 2018 that eBay stock would keep dropping. It did. Now, eBay stock sits below $30, and is 40% off its 52-week highs.

But, even as a long-term bear, I recognize EBAY’s long-term staying power in the e-retail world. As such, while the stock was dropping from $45 to $30, I kept waiting for a point where the market would become too pessimistic, and the EBAY stock price too cheap, that it would become a compelling buy.

I think we are finally nearing that point.

The EBAY stock price dropped big in response to a slow growth warning hidden inside third-quarter earnings from PayPal (NASDAQ:PYPL). That caused long-time bull Stifel to downgrade the stock to “Hold”. Due to this double hit, eBay stock plunged 10% to $28. At these levels, eBay stock is simply too cheap.

As such, I think this recent sell-off is an opportunity to the buy the dip.

Slow Growth Warning From PayPal

EBAY stock had a huge run in 2017 that was powered by improving top-line growth rates. Those improvements had bulls and analysts pounding on the table about an eBay turnaround. But, growth rates never got all that big. Recently, they started to plateau. As top-line growth has plateaued, turnaround hopes have vanished, and eBay stock has dropped.

Now, it looks like revenue growth is about to decelerate meaningfully.

PayPal just reported really good third-quarter numbers. But, hidden in the report was a dire warning about slowing growth at eBay. According to PayPal, eBay marketplace volumes rose just 3% in the quarter. Over the past three quarters, PayPal reported eBay marketplace volumes growth of 6-7%, and that lined up almost perfectly with reported eBay GMV growth in the overlapping periods of roughly 7%.

In other words, PayPal’s reported eBay marketplace volume growth has historically been an accurate leading indicator of eBay GMV growth, and PayPal’s reported eBay marketplace volume growth this quarter was really weak. That is a bad sign for eBay that GMV growth likely decelerated to 3-4% this quarter, versus a 7% run-rate over the past several quarters.

This is especially bad in the context of eBay’s other operating metrics. At 7% GMV growth, items sold growth was already at 0% and buyer growth was rapidly decelerating. Thus, if GMV growth dropped to 3-4% this quarter for eBay, that implies that items sold growth went negative and buyer growth likely flat-lined. That means selling engagement is dropping, and the buying community has maxed out.

None of this is good news for eBay. As such, eBay stock dropped sharply in response to PayPal’s report.

Ebay Stock Is Too Cheap

Time and time again, I warned that this would happen. While eBay is dominating a niche part of the digital retail world — a digital garage sale connecting buyers and sellers — there clearly isn’t much growth left in that niche. Eventually, that niche was going to max out and eBay’s revenue growth rates would start to stall out.

We are at that point now. From here forward, revenue growth at eBay will be driven almost exclusively by higher average transaction prices and classifieds growth. That means that after this year, this is a 3-5% revenue growth company. As revenue growth moderates, management will likely peel back growth oriented investments and focus on raising profit margins. This is doable. As such, in the big picture, eBay is a 3-5% revenue growth company with potential to stabilize operating margins around 30%.

That growth profile wasn’t strong enough to support eBay stock at $45. That is why the stock fell. But, it is also more than strong enough to support eBay stock at $28. That is why the stock could rally from here.

Under the above assumptions, I think a reasonable 2023 forward earnings-per-share target for eBay is $3.20 versus $2.30 expected in 2018 (roughly 7% compounded annual growth rate). This stock normally trades around 16X forward earnings, which is also the market-average multiple. Throw that on $3.20. You arrive at a 2022 price target of just over $51. Discount back by 10% per year and you arrive at a 2018 price target of about $35.

As such, below $30, eBay stock looks dramatically undervalued relative to fundamentals.

Bottom Line on EBAY Stock

The growth narrative at eBay was never all that great. But, below $30, the growth narrative is good enough to support eBay stock, and then some. I reasonably see a rally to back above $30 in the near future.

As of this writing, Luke Lango was long EBAY and PYPL.