UBS Raises eBay's Price Target Following 'Solid' Q2 Report

Shares of eBay Inc EBAY touched a new 52-week high of $30.31 after a solid beat/raise quarter. UBS reiterated a Buy rating and raised its price target by $2 to $34.

"We continue to believe that eBay provides a number of paths to value creation: a) improving core operations (supported by structured data & mobile); b) capital allocation decisions (buybacks, M&A) and potential non-core asset monetization; and c) further value realization for faster growing businesses (StubHub, Classifieds)," analyst Eric Sheridan wrote in a note.

Sheridan expects the debate on structured data to increasingly shift from "if" it will be successful to the slope of forward progress despite a 12-24 month road ahead of investing in growth.

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The analyst is positive on StubHub generating 35 percent GMV growth and 40 percent revenue growth (FX-neutral); acceleration in the Marketplace business; and approval of an additional $2.5 billion stock buyback.

"We were less positive on: a) active buyer growth of only 4% YoY (despite ~200 bps easier comp); b) marketing services growth decelerating 800 bps ex-FX vs. Q1 (on lower ad load/monetization & shift to mobile); & c) upward pressure on product development opex (though mgmt. comments clearly point toward growth initiatives as driver)," Sheridan noted.

That said, the analyst raised his 2016 and 2017 EPS forecast to $1.90 (from $1.87) and $2.11 (from $2.10). Consensus estimate calls for earnings of $1.86 a share for 2016 and $2.03 a share for 2017.

"Despite a recent improvement in stock performance (1176 bps vs SPX since Jun 30th), we still see a solid risk/reward skew to the upside that could result from the right mix of growth and s/h returns driving a re-rating of the shares," Sheridan added.