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Sale Of eBay's Classifieds Segment Would Be A Financial Positive, Says BofA

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Sale Of eBay's Classifieds Segment Would Be A Financial Positive, Says BofA

A Bloomberg report over the weekend quoted unnamed sources as saying that eBay Inc (NASDAQ: EBAY) had received bids for its Classifieds business from multiple bidders, in the range of $8 billion to $10 billion.

A bid in this range is a financial positive for eBay given the issues at Classifieds this year, according to BofA Securities.

The eBay Analyst

Justin Post maintained a Neutral rating on eBay with a $44 price target.

The eBay Thesis

Assuming a premium multiple for Classifieds, given its high margin profile, the segment’s valuation comes to $8.3 billion, which is at the lower end of the reported bids, Post said in a Wednesday note. (See his track record here.)

A valuation of $8.3 billion for Classifieds implies a 21x multiple on BofA’s 2021 profit estimate of $389 million, the analyst said, adding that a 21x segment multiple is in-line with the higher end of recent transactions in the classifieds space.

Classifieds could face pressures in 2020 due to COVID-19. On the other hand, the pandemic could also impact the availability of credit to finance large acquisitions, Post said. 

“We would view a potential sale of Classifieds between $8-10bn as positive for the stock, all else equal, given issues for Classifieds in 2020 and implied residual core eBay valuation.”

EBAY Price Action

Shares of eBay were trading down 0.66% at $43.08 at the time of publication Wednesday.

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Latest Ratings for EBAY

DateFirmActionFromTo
Jun 2020Deutsche BankUpgradesHoldBuy
Jun 2020JefferiesUpgradesUnderperformHold
Jun 2020Wells FargoUpgradesUnderweightEqual-Weight

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