SunTrust's Bob Peck Has Higher Confidence In eBay's Turnaround, Price Target Raised To $33

Following are Peck's key estimates for the third quarter:

1. "GMV at $20.4 billion, up ~4 percent YoY and versus the Street at $20.3 billion."
2. "Revenue of $2.185 billion, in line with consensus, and versus guidance of $2.16–$2.19 billion."
3. "Non-GAAP EPS of $0.44, versus guidance of $0.42–$0.44 and Street at $0.44."

The analyst pointed out a recent data of ChannelAdvisor, suggesting U.S. GMV growth in the third quarter may have picked up modestly both sequentially and versus the year ago quarter.

The fixed price business, which represents more than 80 percent of the retail marketplaces GMV, increased on a year-over-year basis for ChannelAdvisor's clients, reversing the declining trend during the past four months.

Related Link: EBay Acquires Search Tech Company Corrigon Ltd

"We are optimistic on the turnaround given the large base of buyers and sellers, and eBay's dominance within the long-tail, but acknowledge that much remains to be done even as competition is increasing," Peck wrote in a note.

The analyst noted that close to 50 percent of unit sales on Amazon.com, Inc. AMZN are by third party (3P) sellers, who also benefit from about 50 percent of U.S. households being Prime members and the "Fulfilled by Amazon" program.

In addition, Wal-Mart Stores, Inc. WMT recently acquired Jet.com to bolster its online efforts, and Facebook Inc FB launched Marketplace, which can all support 3P sellers.

According to Peck, eBay still needs to reposition the brand, reignite the buyer acquisition flywheel and arrest the decline in the C2C platform, which, according to management, "will take time to yield material results."

On the positive note, Peck sees scope for rerating once visibility improves, given: "1) a leveraged equity shrink can create significant shareholder value, 2) disciplined M&A, and 3) shareholder-friendly management."

That said, the company has to deal with modest growth in core business, stiff competition and tough from StubHub.

"While much remains to be done, we remain cautiously optimistic that growth could reaccelerate in the near-to-mid term," Peck added.

Shares of eBay closed Friday's trading at $31.62. Peck, who has a Hold rating on the stock, raised his price target to $33 from $30.

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