eBay Is A Rare Value Internet Stock With Growth Potential

Aegis Capital’s Victor Anthony views eBay Inc EBAY as a “rare value Internet stock with growth potential.” The analyst believes the valuation is undemanding, given that the stock is trading at a discount to its e-commerce peers, while the 8 percent free cash flow yield is “enticing.”

Anthony initiated coverage of the company with a Buy rating and price target of $36.

Growth Potential

“Following a challenging few years, eBay’s core marketplace is stabilizing, StubHub is executing, the Classifieds businesses continue to grow at a healthy double-digit pace, and management is returning capital via aggressive share repurchases,” the analyst mentioned.

Anthony believes that $5.0-$7.5 billion of value could potentially be unlocked through StubHub and Classifieds.

Following a few challenging years, the analyst noted that eBay’s GMV growth had stabilized, while the structured data implementation had potential to improve conversions.

Unlocking Value

Both MAUs and app downloads on iOS had been strong in the first two months of the quarter, indicating a robust Q4.

Mobile GMV accounted for 47 percent of the total GMV in Q3 2016, and the company stated that mobile GMV growth had accelerated on an ex-FX basis.

“Growth continues to benefit from product improvements and a strong events line-up. We see StubHub as a potential spinoff (or sale) in the future,” Anthony went on to say, while adding the Classifieds was an underappreciated asset.

The analyst expects eBay to use its free cash flow to continue to buyback shares.