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eBay's Stock Is Up Big: How's Wall Street Reacting?

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October 22, 2015 12:08 pm
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  • Shares of eBay Inc (NASDAQ: EBAY) rose more than 13 percent following its third-quarter results.
  • EBay earned $0.43 per share in its third quarter – $0.03 more than analysts expected. Revenue of $2.1 billion matched the $2.1 billion analysts were looking for.
  • Wall Street experts were mixed following the quarterly report.

EBay spiked higher after the company said it earned more than analysts were expecting during its third quarter. The stock's after-hours rally carried over into Thursday's session and was seen higher by more than 13 percent at $27.42.

Here is a summary of what some of Wall Street's top analysts were saying after the print.

Morgan Stanley: ‘Good First Signs Of Improvement'

Brian Nowak of Morgan Stanley commented in a note that eBay's third-quarter results were a "step in the right direction" as total U.S. GMV (gross merchandise volume) growth accelerated to 3 percent, which was ahead of the 1 percent he expected.

Nowak said eBay's overall GMV beat was driven by better-than-expected buy growth as the company added two million active buyers sequentially with India active as a "notable driver" of the active buyer growth.

Nowak also stated that eBay has "multiple irons in the fire" to improve longer-term buyer and GMV trends including a new mobile app, investment in new social media acquisition channels, and eBay Plus in Germany.

Bottom line, Nowak is "encouraged" by the GMV and buyer trends but he needs to see signs of "sustained improvement" as top-line trends will be "important to the performance of the stock" heading into 2016.

Shares remain Equal-weight rated with an unchanged $26.50 price target.

Related Link: Benchmark's Kurnos Sees 'Downside Mostly Priced' Into eBay

Axiom: Solid Quarter Out Of The Gate

Victor Anthony of Axiom commented in a note that eBay's first results post-PayPal spin was "solid" and should calm investor concerns.

Anthony said that while eBay's business "is not out of the woods" and "continues to face challenges," the third-quarter print contained numerous positives: 1) foreign exchange-neutral GMV growth "held steady" at 7 percent and U.S. GMV also "held steady" at 3 percent, 2) Active buyers grew by two million users sequentially versus zero growth in the prior quarter, 3) eBay generated $462 million in free cash flow and repurchased nearly 22 million shares, 4) StubHub growth "rebounded," and 5) the business is "increasingly shifting" to mobile as 42 percent of GMV was generated from a mobile device.

Anthony added that a continued momentum should support a mid-teens multiple on the stock, but its growth profile is "not one that growth investors will salivate over." Nevertheless, its below-peer and below-market earnings multiple (12x, PEG of 0.9x) and an 8.5 percent free cash flow yield is "appealing."

Shares remain Buy rated with an unchanged $34 price target.

Wedbush: ‘Stable' Results, ‘Quiet' Concerns

Gil Luria of Wedbush commented in a note that eBay's international growth and buybacks drove a higher-than-expected earnings beat. On the other hand, the analyst suggested that U.S. market growth continues to see headwinds as management's emphasis on structured data is "dampening" seller supply while a mobile app update is also "dampening" product demand.

Luria said domestic headwinds may "persist" for a few quarters until the platform's product catalog "reaches critical mass" and app flaws are fixed.

Luria also pointed out that the company's $600 million of buybacks in the quarter (22 million shares) "significantly" contributed to the earnings beat. The company has a remaining $2.4 billion in its share buyback authorization and management is likely to "continue its cadence of buybacks" if it can do so "opportunistically."

Nevertheless, the analyst maintained a Neutral rating with an unchanged $27 price target based on a 14x multiple on 2016 earnings per share estimate – a multiple that is in line with companies showing a similar growth rate.

Elsewhere On The Street

Analysts at Benchmark maintained a Buy rating with an unchanged $29 price target.

Analysts at Canaccord maintained a Hold rating with a price target raised to $28 from a previous $27.

Analysts at Macquarie maintained a Neutral rating with a price target raised to $29 from a previous $28.

Analysts at SunTrust Robinson Humphrey maintained a Neutral rating with an unchanged $28 price target.

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