Deutsche Bank Lowers Estimates on eBay (EBAY)
Deutsche Bank is out with a research report this morning, where it reiterated its Sell rating on shares of eBay (NASDAQ: EBAY); it has a $16.00 price target on the stock.
The DB analysts said, “We remain sellers of shares of eBay, as a combination of US dollar strength, weak US sales activity, and discontinuation of the Microsoft Bing CashBack program will likely result in lowered earnings guidance for 2010. We are reducing our estimates for 2010, reflecting a 5% operating profit dollar decline this year (vs. Street expectations of ~10% profit growth). While our revision largely reflects a move to $1.20 per Euro on cross rates for 2H 2010 and 2011, weak business fundamentals have not been fully reflected in our model.”
They noted, “With the US dollar strength, we believe eBay represents the company most at risk in our coverage universe on earnings impact, as USD strength impacts revs, operating profits and tax rates. Feedback from US sellers, 3rd party platform providers suggests that sales have weakened significantly in 2Q, representing an impact to estimates. The upcoming end of CashBack likely impacts eBay, as the company is a major beneficiary of Bing’s search marketing strategy, thereby leading to higher ad rates and lower traffic levels (beyond July 30th).”
They closed by saying, “Our new estimates are based on a Euro Dollar exchange rate of $1.27 for 2Q 2010 and $1.20 for 2H 2010 and 2011. For 2Q 2010, we are lowering our rev est. to $2.08bn (vs. $2.12bn previously) and EPS estimate from $0.36 to $0.35. Our 2010 estimates now call for revs/EPS of $8.6bn/$1.47 vs. $8.8bn/$1.54 previously. For 2011, we expect revs/ EPS of $8.7bn/$1.45 vs. $9.1bn/$1.56 previously.”
