EBay Stock Takes A Hit, But Soft Q2 Guidance Appears Conservative

EBay IncEBAYfirst-quarter earnings report and guidance was reason enough for investors to send the stock lower by around 3 percent Thursday morning. But not all among Wall Street are throwing in the towel. Baird's Colin Sebastian maintains an Outperform rating on eBay's stock with a $38 price target as he believes the company's first-quarter results were "solid" and the guidance appears to be "somewhat conservative."

GMV Slightly Better Than Expected

According to Sebastian, while eBay's gross merchandise value (GMV) of $20.9 billion fell slightly short of the $21 billion expected, US GMV growth (excluding StubHub) of 3.4 percent on a year-over-year basis was slightly ahead of expectations. Moreover, GMV growth on a foreign exchange neutral basis rose 5 percent year-over-year and remained stable from the fourth quarter.

Sebastian is now expecting a mid-single-digit U.S. Marketplace GMV growth by the end of the year which will help to offset a "significant" deceleration in StubHub's growth.

Q2 Guidance Looks Conservative

EBay guided its second-quarter revenue and earnings per share to be in a range of $2.28 billion to $2.32 billion and $0.43 to $0.45, respective. These figures are short of the consensus estimates of $2.32 billion and $0.47 per share.

Sebastian believes these figures are "somewhat conservative" when considering eBay's continued expansion of its structured data and a stepped-up campaign. Perhaps more important is the fact that eBay's management reiterated its full-year guidance, which implies a great acceleration in volume during the bottom half of 2017.

Bottom line, the analyst stated that eBay offers "good visibility for ongoing solid e-commerce growth" while a focus on technology improvements will improve the buyer experience.

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