Benchmark's Kurnos Sees eBay's StubHub As Undervalued, Probable Sale Forthcoming

"Given eBay's over-weighted revenue and profit contribution from the Marketplace segment, we think investors often overlook StubHub's potential to unlock or add value," stated Kurnos. The company "has quietly built a dominant market share position in the secondary ticket market" and is now in the process of expanding internationally," said the analyst.

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As only 2 percent of StubHub's revenue came from international sources, the analyst believes there is significant opportunity outside the county. "We think StubHub's acquisition of Tickebis in Spain is indicative of their desire to maintain secondary marketplace leadership at any cost (paying an estimated 3.6x EV/Revenue), even if the international secondary marketplace may only represent a total $500–$750 million revenue opportunity currently," stated Kurnos. The initiative made sense to expand market share at all costs and will contribute to estimated future margin pressure in the short term.

Competitive Pressure And Probable IPO

Kurnos slightly worried that TicketMaster, a similar online secondary ticket seller, would provide a significant competitive challenge. The rival will play a part in StubHub's "likely" margin pressure, while StubHub expands its market share.

This won't matter much, as the analyst expects "StubHub will eventually be monetized through a sale of IPO process."

At the time of writing, eBay traded at $24.52, down 0.18 percent shortly after Tuesday's opening bell.