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

eBay IncEBAYPaul BiebereBay'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:

Monetization potential of the "under-appreciated" businesses, which could be worth $9.5 billion to $12.8 billion.

Marketplace GMV acceleration driven by new product experiences and marketing initiatives.

Incremental revenue from an uptake in promoted listing ads.

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.

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