BofA Analyst Sees Upside Case Of $33 In eBay, Downside Case Of $23, More Risk-Reward At PayPal

In separate reports published Tuesday, BofA Merrill Lynch analyst Justin Post commented on

and

after the latter was spun off and began regular trading. Analyst Justin Post maintained a Buy rating on eBay, while reducing the price objective from $75 to $33, to reflect the PayPal spinoff. While noting the investment positives for eBay, Post included "signs of stability" in 2Q, acceleration in 2H on easier comps, attractive valuation, "potential that search & structured data enhancements will lead to better internal and external (SEO) search performance," EPS upside via aggressive share buybacks and a robust FCF profile. In the report BofA Merrill Lynch noted, "We see an upside case scenario of $38 based on 18x a slightly higher 2016 EPS estimate of $2.00 plus $2 in asset value driven by accelerating Marketplace growth and/or aggressive share repurchase activity. We see a downside scenario of $23 based on 12x a lower 2016 EPS of $1.90 (plus no credit for cash/assets) if Marketplace fundamentals deteriorate or share repurchase activity is limited." Justin Post initiated coverage of PayPal with a Neutral rating and a price objective of $44, saying that the company had "a strong brand, high adoption, and unrivaled Online scale in an attractive category – digital payments." Post also commented that independence may allow PayPal to be "more aggressive" with partnerships and M&A. While saying that there were several positives, the report explained that "a big recent spin-off marketing push" had aided the stock, while decelerating user growth and competitive concerns could "limit multiple expansion." "PayPal is growing faster than payment network comps, arguing for a premium, but has more competitive and margin risk, in our view," Post added.