JPMorgan Reduces eBay Inc Price Target, But Still Bullish At Current Price

JPMorgan Reduces eBay Inc Price Target, But Still Bullish At Current Price

While internet stocks as a group tanked back in March, most have stabilized or rebounded over the last month. eBay Inc (NASDAQ:EBAY), following a strong of bad news and one major executive departure, has continued to fall from a recent high of $59.7 to $49, and may be at an attractive entry point for investors.

“We believe that some of these recent events will weigh on operational performance in the near-term—particularly the security breach—but we still believe that eBay remains well positioned overall in an increasingly omnichannel retail landscape and that the risk/reward is favorable from current levels,” writes J.P. Morgan analyst Doug Anmuth who rates eBay Inc (NASDAQ:EBAY) as Overweight despite lowering his price target from $61 to $56.

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A string of negative headlines dragging on eBay’s stock price

The bad news started with the announcement that it would repatriate foreign cash, meaning that it needs the money badly enough to accept the tax hit. This was followed shortly after by a cyber-attack that compromised eBay Inc (NASDAQ:EBAY) security and hurt its public image. Anmuth expects the bad PR to fade as it usually does, but eBay has decided to implement two-factor authentication at checkout. This is more secure, but it’s also more of a hassle and the additional checkout friction could shave sales a bit.

Recent changes to the Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) Panda algorithm that determines search results has reduced eBay Inc (NASDAQ:EBAY) traffic, but the site only gets 11% of its total traffic from Google in the first place (plenty of people go directly to the site to shop) and it has navigated updates in the past, so Anmuth believes it will adapt to the new system as well.

Slower growth, loss of key talent presents longer term challenges

The bigger problems are slower gross merchandise volume (GMV) growth and the loss of PayPal president David Marcus. The departure seems to have been amicable, he was convinced to go to Facebook Inc (NASDAQ:FB) to monetize Mobile Messaging, but a shakeup at the top of eBay Inc (NASDAQ:EBAY)’s most valuable business isn’t reassuring to investors. There’s no reason to believe they won’t find an able replacement, but whoever gets tapped to fill Marcus’s shows will still have to prove themselves.

eBay Inc (NASDAQ:EBAY) GMV growth peaked at 19% year-on-year at the end of 2012 and has since declined to 11% last quarter, with another estimated drop to 9% for 2Q14. Ultimately, all the other factors that have depressed eBay’s stock price are probably short term issues that can be corrected. But losing key talent as the business is starting to slow is more problematic.

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