eBay released its latest earnings report on Thursday before opening bell, and Wall Street was pretty happy with it. Shares soared to a new high after that report, climbing as high as $65.58 per share on Thursday before dipping today, falling as much as 0.24% to $65.43 per share.
PayPal officially separated from eBay this morning.
eBay slims down
eBay’s second quarter results were pretty solid as gross merchandise volume (on a currency-neutral basis) re-accelerated although buyer growth continued to slow. Marketplaces revenue beat consensus estimates by about 4%. One trouble area was in web traffic, as despite a 6% year over year increase in global active buyers, eBay didn’t see any sequential ads from the previous quarter. This demonstrates that last year’s search engine optimization (SEO) changes continue to weigh on the company’s results.
What may have cheered investors more was the fact that eBay is slimming down, not only with the spinoff of PayPal but also the disposal of its Enterprise unit. The online auction giant is selling the division to Permira for $925 million.
eBay, PayPal to be acquired?
Kathleen Brooks, Research Director at Cityindex.com.sg, observed, “With the recent disposal of its stake in Craigslist and the eBay – PayPal split due on Friday, the market is certainly optimistic that this will allow eBay to narrow its respective strategy. It should also help PayPal to concentrate on its core business without having to worry about eBay, which suffered reputational damage in recent years after small sellers on the site complained that they were being neglected in favor of larger, more lucrative sellers including Target and Best Buy, and as competition emerged from the likes of Amazon.”
Brooks also suggested that the small sizes of eBay and PayPal could make them attractive takeover targets in the coming months.
Cannaccord Genuity ups eBay price target
After Thursday’s earnings report, Canaccord Genuity analyst Michael Graham and his team raised their price target for eBay from $52 to $60 per share but maintained their Hold rating on the stock. In addition to the SEO changes noted above, they also see cyber-security being an issue in the wake of the security breach last year.
They reduced their estimates for eBay as a standalone company to reflect PayPal’s spinoff and the sale of the Enterprise units. They’re now expecting the online auction giant to post earnings of $2.50 per share for this year and $2.46 per share for next year.