eBay shares shot upward after last night’s earnings beat, rising as much as 3% in premarket trading this morning, but all analysts aren’t convinced that all is well at the online auction giant. At least one firm trimmed its price target for the company based on the company’s weak guidance for this year. However, another firm remains positive on eBay because of the future spinoff of PayPal.
eBay results rather mixed
In a report dated Jan. 21, UBS analysts Eric Sheridan, Timothy Chiodo and Vishal Patel said they trimmed their price target and estimates for eBay based on headwinds and the upcoming split from PayPal. Their price target is now $62 per share, a slight decrease from their previous target of $65 per share. Although Wall Street seems generally pleased with last night’s earnings report, the UBS team noted that overall, the results were mixed.
At this year's SALT New York conference, Jean Hynes, the CEO of Wellington Management, took to the stage to discuss the role of active management in today's investment environment. Hynes succeeded Brendan Swords as the CEO of Wellington at the end of June after nearly 30 years at the firm. Wellington is one of the Read More
They’re positive on eBay’s new $2 billion share repurchase program, which is in addition to the $1 billion that was left on the previous program. Also the company provided more clarity on the PayPal spinoff and plans to streamline the costs this year through job cuts and repositioning to spur growth at both companies. eBay also saw strong mobile payments and commerce growth and announced that it is looking into the possibilities of spinninf of its Enterprise unit through a sale or initial public offering.
The “less positive” elements in eBay’s earnings report
On the slightly negative side, the UBS team noted that the weakness in the Marketplaces segment continues in the wake of the security breach and Google’s search algorithm changes. Also cross-border trade was weaker because of a drag from the weakening U.S. dollar, and eBay spent more on marketing during the quarter.
Additionally, PayPal’s take rate fell 30 basis points due to major changes in merchant mix and Braintree. eBay also provided weaker-than-expected 2015 fiscal revenue guidance even though management factored in a headwind of 300 basis points from foreign exchange rates.
The UBS team maintained its Buy rating on eBay because the analysts are still positive on the company after the separation from PayPal. They expect shares to remain range-bound as long-term investors stick around due to continued capital return and the promise of the coming PayPal spinoff.
Going into the PayPal spinoff
All of Wall Street has been keeping a close eye on eBay since the company announced to spin off PayPal into a separate company. In their report dated Jan. 21, analysts Scott Devitt, Lamont Williams and Ansel Parikh said they maintained their Buy rating and $65 per share price target on eBay based on the upcoming spinoff.
The plan remains on pace to complete sometime in the second half of the year. Last night management offered also some more details regarding the separation costs and how each business will be structured in terms of capital. eBay will have $2 billion in net debt, while PayPal will have $5 billion.