Baird Equity Reseach analysts Colin Sebastian and Rohit Kulkarni maintain an Outperform rating for eBay Inc (NASDAQ:EBAY) as they look at the results from a recent survey.
Our proprietary eBay Inc (NASDAQ:EBAY) Marketplace survey suggests a slight acceleration in eBay Marketplace growth since early February, although trends overall are fairly stable, and we believe largely in line with expectations. For the full month of February, our tracking suggests low double-digit growth, slightly above our January tracker. Maintain Outperform rating.
February finishes stronger after a slow start
Our proprietary eBay Tracker indicates a modest pick-up in growth over the past 2-3 weeks following a slow start to the month and the year. Specifically, in our survey, the first week in February marked the slowest growth week, ramping to low double-digit volume growth overall. Based on our merchant checks, we believe some of the lumpiness stems from upgrades to eBay’s search engine (Cassini) as well as mixed consumer spending trends. We also note that initial data points regarding February e-commerce in the U.K. suggest stable growth, likely boosted by soggy weather conditions. Overall, we believe data suggest Q1 is trending largely in line with expectations for the eBay Marketplace, although we note that year-over-year comps are more difficult in March.
Using Machine Learning to drive growth in emerging markets
According to a Techcrunch article over the weekend, eBay is “doubling down” on machine learning in order to drive faster growth in emerging markets. Hassan Sawaf, who is eBay’s senior director of machine translation, is leading the company’s efforts to automate the translation of product listings into Russian, and recently launched an update to eBay search that significantly increases the number of product listings available for Russian-language shoppers. We note that context translation is one several machine learning initiatives by eBay, which also includes the “Cassini” search engine upgrades.
eBay Valuation
Maintain Outperform rating and $65 price target for eBay. We believe downside risk from current levels is likely limited by the high value of PayPal and Carl Icahn’s recent activism (sum of the parts analysis).