Technology

Analysts Get Much More Bullish on eBay, Growth Avenues Ahead of Value

Jon C. Ogg

Published: July 21, 2016 10:40 am

Last Updated: January 13, 2020 5:28 am

After the decision to break up the eBay Inc. (NASDAQ: EBAY) empire, many analysts and investors decided in their minds that eBay represented a low-growth old web economic engine. It is the undisputed leader in online auction efforts for the public, and its reach goes much farther than just the United States. Still, eBay is often considered a value stock by the investing community.

What may be changing this value view is how investors have reacted to eBay’s second-quarter earnings report. eBay shares were last seen up 10% at $29.70, and shares even hit a 52-week high of $29.89. Analysts have universally cheered eBay’s report. Even the analysts that have Neutral and Hold ratings seen to have handily raised their price targets.

24/7 Wall St. tracked more than a dozen analyst calls on eBay after its earnings report. Again, some analysts held on to cautious ratings but raised their targets. Some of the analysts with Buy and Outperform ratings now see even greater upside ahead.

eBay said that it had $0.43 in earnings per share (EPS) and $2.23 billion in revenue. This compares to the consensus estimates from Thomson Reuters of $0.42 in EPS on $2.17 billion in revenue.

In terms of third-quarter guidance, the company expects to have EPS in the range of $0.42 to $0.44 on revenues between $2.16 billion to $2.19 billion. The consensus estimates call for $0.44 in EPS on $2.14 billion in revenue.

Merrill Lynch reiterated its Buy rating and raised its price objective to $35 from $30. It has two reasons to own eBay: the opportunity for structured data driven site improvements to accelerate growth and the view that trading at 14 times 2017 earnings just doesn’t reflect upside from its StubHub and Classified asset values. The firm said:

We are raising our price objective to $35.00 from $30.00 based on higher estimates and a higher multiple (16x earnings, up from 14x) on opportunity for acceleration in growth. We view eBay’s results as a neutral to positive read-across for Amazon, suggesting a relatively stable macro environment throughout the quarter, with no material impact on spending from Brexit.

Credit Suisse maintained its Neutral rating, but the firm raised its price target to $31 from $28. Its take is that gross merchandise value growth is higher, but there is a question on its sustainability. Credit Suisse said:

The highlight of the quarter was better than expected GMV growth for the core US marketplace – this is driven by the progress made in structured data initiative, which represents approximately 10% of total traffic. This coupled with StubHub outperformance offset the international revenue shortfall and as a result, overall revenue was in-line with our expectations. The key question left unanswered is the sustainability and build for GMV growth off what is a clear inflection point – which is something eBay shareholders have been anticipating for some time. Our estimates for the balance of the year increase modestly on the heel of this report, and as we flow thru a lower tax rate our price target increases to $31.00 versus prior $28.00.

Longer term, we continue to focus on the engineering/product-driven shareholder value creation eBay management is looking to deliver, namely: 1) sustained GMV growth acceleration via structured catalog data, as well as 2) take rate improvements via promoted listing ads, and we maintain our Neutral rating.

Other key analyst calls mostly had higher price targets as well. There are other analyst calls that have not been parsed out, but this montage should adequately show how estimates and targets are being raised. These were seen as follows:

• Axiom Capital reiterated its Buy rating and raised its price target to $34 from $30.
• Bernstein has an Outperform rating and raised its price target to $36 from $32.
• BMO Capital Markets has a Market Perform rating but raised its $26 target price to $28.
• Canaccord Genuity has a Hold rating and raised target price from $27 to $28.
• Cowen has a Market Perform rating and raised its old $25 target price to $30.
• Deutsche Bank has a Hold rating and raised its price target to $30 from $28.
• Goldman Sachs has a Buy rating and raised its price target from $30 to $34.
• Jefferies has a Hold rating, but the firm raised its price target to $32 from $27.
• JPMorgan has a Neutral rating, but the firm raised its price target to $29 from $26.
• Macquarie has a Neutral rating and has a $32 price target.
• Mizuho has a Neutral rating but raised its old $26 target price to $31.
• Monness Crespi Hardt has a Buy rating and raised its price target to $32 from $29.
• RBC Capital Markets has a Sector Perform rating but raised its price target from $28 to $31.
• Robert W. Baird reiterated its Outperform rating and raised its price target to $35 from $30.
• S&P Global reiterated its Hold rating with a $30 price target.
• Susquehanna reiterated its Positive rating and raised its price target to $34 from $32.
• UBS reiterated its Buy rating and raised its price target to $34 from $32.
• Wedbush Securities is at a Neutral but raised its target price from $26 to $29.