eBay stock tanked following the company’s weak guidance Wednesday night, and multiple analysts adjusted their price targets for the company. Despite management’s weak outlook, eBay’s third quarter performance was solid, and as a result, some analysts left their price targets the same, while others cut their targets and still others raised their targets.
eBay makes some progress
Canaccord Genuity analyst Michael Graham maintained his Hold rating and $28 price target and said in a report dated Oct. 19 that eBay showed stability in the third quarter, indicated that it is making progress. One good thing he noted was the 300 basis point acceleration in transaction revenue growth, bringing it to an 8% increase on a currency-neutral basis for a total of $2.22 billion. That beat the consensus of $2.19 billion. eBay also beat consensus on non-GAAP earnings at 45 cents per share, which was a penny ahead of the Street.
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Additionally, the take rate on StubHub expanded by more than 160 basis points, and eBay beat consensus on operating income by 5%. The company also expanded its margin quarter over quarter and increased its full-year revenue outlook by about 1% despite the weak guidance for the fourth quarter. Their new revenue projection is $8.95 billion to $9 billion, compared to their previous outlook of $8.85 billion to $8.95 billion. eBay also bought back $500 million worth of shares.
Bad points about the earnings report
One bad thing Graham noted was a slight deceleration in active buyer growth, although the company still added 1 million active buyers quarter over quarter. Gross merchandise volume also decelerated, mostly as a result of a modest slowdown in the U.S. Marketplace business and difficult comparisons in StubHub. Further, he noted that management left their full-year non-GAAP earnings per share guidance the same at $1.85 to $1.90 even though they increased their revenue projection. The reasons were currency headwinds and higher brand spend.
They greatly increased their GAAP earnings outlook to account for an increase from the sale of the majority of the company’s stake in MercadoLibre.
Price target cuts for eBay
Among the firms that cut their price targets for eBay is Wedbush, which trimmed its target by $1 to $33 per share but maintained its Neutral rating. Analyst Aaron Turner does still expect the company to benefit from secular growth within the e-commerce industry. He expects the improvements to its site and mobile experience and also structured data to slow down the rate at which it loses market share.
Susquehanna analyst Shyam Patil raised his target for eBay from $34 to $38 per share and maintained his Positive rating on the stock. He feels that the company’s turnaround is on track and actually advised investors to buy today’s dip in the stock. He likes the company’s solid free cash flow, capital return efforts and steady to improving growth rates.
RBC Capital Markets analyst Mark Mahaney added $1 to his price target, bringing it to $32 per share. He remains cautious, however, as he had been expecting eBay’s Structured Data Initiative to push accelerating growth in gross merchandise volume, but it didn’t happen, at least not this time around. From management’s commentary, he doesn’t believe it will happen any time in the near future either because they said their initiatives will take a year or more to play out.
eBay shares tanked by as much as 10.67%% during regular trading hours on Thursday, falling as low as $28.75