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EBay Is A Rare Value Story With Several Paths To Value Creation

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EBay Is A Rare Value Story With Several Paths To Value Creation

Analysts at Credit Suisse have high expectations for eBay Inc (NASDAQ: EBAY) heading into the company's second-quarter earnings report on July 20. The firm's Paul Bieber maintains an Outperform rating on eBay's stock with an unchanged $44 price target, saying the company is a "rare value story" with multiple paths toward value creations.

Q2 Expectations

EBay is expected to earn $0.45 per share in the second quarter on revenue of $2.30 billion, which is mostly in line with the Street's consensus estimate of $0.45 per share and $2.31 billion, Bieber noted in a research report (see Bieber's track record here).

EBay's first-quarter report did show signs of improvements in Marketplace along with a modest acceleration in U.S. gross merchandise volume and active buyer growth, the analyst continued. As such, expectations for the second-quarter print include a continued momentum, especially since the company's 2017 guidance implies further acceleration in the back half of 2017.

Finally, investors should look out for any commentary on "under-appreciated" assets including the Classified and StubHub businesses.

Beyond Q2

Beyond the second quarter, eBay's status as a "rare value story" is based on four factors:

    1. Monetization potential of the "under-appreciated" businesses, which could be worth $9.5 billion to $12.8 billion.
    2. Marketplace GMV acceleration driven by new product experiences and marketing initiatives.
    3. Incremental revenue from an uptake in promoted listing ads.
    4. Aggressive share repurchases could add $0.10 to 2018's earnings per share.

Finally, the analyst's $44 price target implies a 20x multiple on 2018 Non-GAAP EPS estimates, which represents a modest but justifiable premium to retail comps that trade at 18x while a 6-percent free cash flow yield also provides compelling valuation support.

Related Links:

A Mid-Year Review Of Baird's Favorite Internet Stocks

Several Reasons eBay Just Won An Outperform Rating From Credit Suisse

Latest Ratings for EBAY

DateFirmActionFromTo
Apr 2020SunTrust Robinson HumphreyMaintainsHold
Apr 2020SusquehannaMaintainsPositive
Apr 2020BMO CapitalMaintainsOutperform

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