What To Do With eBay Now? Analysts Debate

EBay Inc EBAY reported Tuesday its third-quarter results highlighted by an EPS beat, in-line revenue and a better-than-expected earnings guidance for the fourth quarter.

Here is a summary of how some of the Street's top analysts reacted to the print.

The Analysts

• DA Davidson's Tom Forte maintains a Buy rating on eBay with a price target lowered from $50 to $40.
• Bank of America's Justin Post maintains at Neutral, price target from $33 to $34.
• Morgan Stanley's Brian Nowak maintains at Overweight, unchanged $55 price target.
• Benchmark's Daniel Kurnos maintains at Buy, price target lowered from $53 to $41.
• Canaccord Genuity's Michael Graham's maintains at Hold, price target from $40 to $30.
• BMO Capital Markets' Daniel Salmon maintains at Outperform, unchanged $40 price target.
• KeyBanc Capital Markets' Edward Yruma maintains at Overweight, price target from $50 to $43.

EBay shares traded around $29.29 at time of publication, up 6.8 percent.

DA Davidson: Compelling Value

The stock remains attractive despite management's guidance for a slowdown of sales growth next year, Forte wrote in a note. The company remains a "cash machine" with expectations for $2 billion in free cash flow in 2018, which can be allocated towards a share buyback program.

Bank of America: Bull Versus Bear Debate

EBay's report showed the company continues to shift its strategy from growing gross merchandise volume (GMV) through marketing to new drivers including advertising and payments, Post wrote in a note. Bears will point to a deceleration in GMV next year, but bulls will highlight the addition of $400 million in margin rich ad revenue and $500 million in payment profits over the coming years.

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Morgan Stanley: Core Business In Focus

EBay's earnings report was better than feared but highlights ongoing competition from retailers investing in their own e-commerce platforms, Nowak wrote in a note. The company continues to struggle to add new users to its platform. While initiatives in advertising and payments "seem to be on track," it's too early to calculate the incremental contribution to the financials.

Benchmark: 'Prudent' Course Of Action

EBay's management team highlighted its own product and marketing efforts as failing to scale as expected as evidence by a "paltry" 2 percent domestic GMV growth, Kurnos wrote in a note. Management is also taking the "most prudent" and possibly only course of action to improve the business in focusing on advertising and payments. While the strategy is unlikely to "stave off" questions relating to prior business decisions and the leadership team, it nevertheless marks a "healthy reset" and creates a "much easier" bar to achieve.

Canaccord: Fair Valuation

A neutral stance on the stock remains justified as bulls and bears both have items to point to, Graham wrote in a note.

The bulls appreciate active buyers and StubHub came in better than expected while advertising and payments initiatives to date are encouraging. Bears will highlight the strength in U.S. dollar, which continues to impact Marketplace volume while items sold were unchanged for the second straight quarter.

BMO: 'More Comfortable' Entry Point

Value investors are greeted with a "more comfortable" entry point given eBay's strategy of lowering marketing spend as a percentage of total revenue and a greater emphasis on profitability. The firm's $40 price target is based on 10.1 times 2019 estimated EV/adjusted EBITDA, which is a discount to the average of e-commerce peers at 20.5 times.

KeyBanc: 'Tapping The Brakes'

EBay's management is "wisely tapping the brakes" on marketing spend and looking to strike a balance between expanding the active base and not disrupting existing buyers, Yruma wrote in a note. Management's initiatives should result in slower near-term trends but the stock remains attractive at 11.9 times 2018 P/E as the company should grow earnings by 10 to 15 percent next year.