eBay Inc Short Term Prospects Doubtful, Long Term Promising


eBay Inc (NASDAQ:EBAY) is susceptible to several headwinds in the near future, but the long-term scenario looks stable for the company, according to a report from UBS dated June 9th. The report was written by analysts Eric J. Sheridan, Timothy E. Chiodo and Vishal J. Patel. In the report, the analysts mention a few issues that may slow down near-term growth. However, the report also notes that these issues will be potentially resolved by the second quarter earnings report due on July 16th.

Short-term headwinds for eBay

The first issue that will affect the growth trajectory of the company is the announcement of an accounting reserve for repayment of foreign cash holdings. Another headwind could be the security breach along with a Google search penalty, which will bring down eBay rankings/traffic related to key search terms. Additionally, the exit of David Marcus to join Facebook’s non-WhatsApp (PayPal Head) messaging efforts will also affect the company. These factors could all contribute to near-term share price weakness.

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Analysts mentioned in the report that some key industry sources are expecting weaker than expected second quarter marketplace results. Sources like ChannelAdvisor, SEMRush and 3P seller have all estimated lower than expected results. According to ChannelAdvisor data for May, eBay Inc (NASDAQ:EBAY) results will be down at least 250 basis points compared to a month ago, despite an easier compare of 450 basis points versus April. SEMRush data also echos similar numbers with organic traffic from top 20 search results coming down 15% over the 10 days post headlines. 3P seller estimates are in the same ballpark.

International markets will be vital catalysts

Analysts are expecting that new users along with the potential market opportunity on mobile platforms, BRIC and international markets for the eBay Inc (NASDAQ:EBAY) ecosystem will accelerate revenue growth in the future years. The long-term scenario in eCommerce and payments is solid for the company according to the analysts, but significant margin expansion due to investment in marketplaces and PayPal is doubtful. Recently, the online retailer rolled out eBayNow, Global Shipping Program, Cassini and The Plaza, which helped it to gain traction with users and sellers in international markets, and could be a potential catalyst for growth in the medium and long-term.

The UBS analysts have maintained a Buy rating on eBay Inc (NASDAQ:EBAY), but have lowered their price target from $64 to $60.