UBS Global Research analysts Eric J. Sheridan, Timothy E. Chiodo and Vishal J. Patel maintain a Buy rating for eBay Inc (NASDAQ:EBAY) as they turn rosy on 2014-2015 estimates.

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Marketplaces deep dive

Despite recent relative strength, eBay Inc (NASDAQ:EBAY)’s stock has underperformed the market by ~15% since January 1st 2013. We believe this 2013 underperformance can be attributed to investor fears around the 2013-2015 targets given at its March 2013 analyst day (which were recently reset lower), PayPal (competitive threats, take rate pressures), & Marketplaces (European macro, revenue growth). In part one of this two part series we discussed the high levels of innovation & partnering taking place within PayPal. In this note, part two, we address Marketplaces through a lens of innovation, new initiatives, & platform strength.

Innovation, initiatives and platform strength

We take a fresh look at strategic initiatives & areas of strength that we believe will contribute to sustained GMV growth and/or provide optionality for the Marketplaces segment: a) BRIC expansion; b) growth in key International markets (UK, Germany, South Korea); c) eBay Now expansion; d) “Connected Glass” digital storefronts; e) “The Plaza” branded online storefronts; f) Cassini (revamped search capability); g) Global Shipping Program (GSP); and h) fixed price GMV growth relative to industry.

Increased confidence in 2014-2015 estimates

As an output of this report, we come away with increased confidence in our estimates and the company’s ability to meet or exceed investor expectations over the course of the 2014-2015. While we are not making changes to our revenue / EBITDA estimates at this time, we note that recent eBay innovations (eBay Now, Global Shipping Program, Cassini, The Plaza, acquisition of PhiSix) & added traction with users & sellers outside the US could provide upside to our estimates over the medium-long term.

eBay’s valuation

We are increasing our price target to $67 (from $64) based on a 50/50 blend of both our weighted average approach (EV/Sales, EV/EBITDA, EV/FCF) & a SOTP. We believe eBay Inc (NASDAQ:EBAY) shares also offer the attractive quality of being less correlated to the market given the given the special situation aspect of the story (i.e., Carl Icahn’s involvement).