eBay Downgraded At Stifel On 'Limited Upside' After Spinoff

In a report published Tuesday, Stifel analyst Scott W. Devitt downgraded the rating on

from Buy to Hold, following the spinoffs of eBay Marketplaces and

. Analyst Scott Devitt said that eBay continued to "recover" from the challenges posed by the SEO algorithm change implemented by

as well as the password breach, which have exerted pressure on traffic and new customer additions since mid-2014. eBay has guided to FX neutral revenue growth of 3-5 percent in 2015 and 0-5 percent in 2016. The company has forecasted "generally flat" operating margins as it expects "an 18-24 month transformation process to diversify its marketing channels and develop sources of traffic/new customers," Devitt said. In the report Stifel noted, "Going forward, eBay plans to focus on SMBs and consumer sellers and leverage technology and structured data to improve merchandising and the user experience." Devitt commented, "We believe distractions resulting from the separation with PayPal, the new management team's focus on strategic initiatives, and the transformation process could potentially slow the recovery in the near-term despite easing prior year compares." Now that eBay is a stand-alone entity, investor focus would be on cash flow generation and capital return to shareholders. The revenue estimates for 2015 and 2016 have been reduced from $18.71B to $8.64B and from $20.93B to $9.03B, respectively. The cash EPS estimates for 2015 and 2016 have been reduced from $3.13 to $1.84 and from $3.45 to $1.91, respectively. The downward revisions reflect the incorporation of the spinoffs in the estimates.