eBay's Price Target Lowered by Barclays; Rating Downgraded

eBay Inc. EBAY price target was recently cut by more than 10% to $25 from $28 by investment firm, Barclays. In addition, analysts downgraded the stock's rating to Underweight from Equalweight.

Following the downgrade, eBay was down 0.08% to $24.10.

Why the Downgrade?

Barclays' analyst Paul Vogel remains concerned that eBay's revenue growth is not enough to offset the core business weakness. He expects the company to continue to struggle in the near future due to weak fundamentals.

Last month, eBay expanded its stock repurchase by $5 billion. However, it did not impress Vogel who believes that such programs only provide temporary cushion to the stock and ignores the weakness in the company's core business. He does not expect any tangible margin or earnings growth in the near term.

The analyst further cited the soft fourth-quarter earnings as one of the reasons behind the downgrade. Shares plunged nearly 13% in response to the weaker-than-expected first-quarter outlook. eBay expects to post adjusted earnings per share in the range of 43–45 cents. The Zacks Consensus Estimate is pegged at 48 cents.

Also, Vogel is concerned about intensifying competition in the e-Commerce and Internet space.

Conclusion

eBay is one of the world's largest online trading communities with a powerful marketplace for the sale of goods and services by individuals and small businesses. The company enables trade on a local, national and international basis with local sites in numerous markets of the United States, the United Kingdom, Canada, Germany, Austria, France, Italy, Japan, Korea and Australia.

While the separation of PayPal Holdings, Inc. resulted in the loss of a good growth engine, eBay is trying to attract customers to its online properties, engage them and thus boost revenues. However, intensifying competition in the e-Commerce space as well as the foreign exchange headwinds remain major concerns for the Zacks Rank #3 (Hold) stock.

Stocks to Consider

Some stocks that have been performing well in the same space are Travelport Worldwide Limited TVPT, Groupon, Inc. GRPN and Gaiam Inc. GAIA. While Travelport sports a Zacks Rank #1 (Strong Buy), Groupon and Gaiam have a Zacks Rank #2 (Buy).

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