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UBS Raises eBay's Price Target Following 'Solid' Q2 Report

Shares of eBay Inc EBAY 11.3% touched a new 52-week high of $30.31 after a solid beat/raise quarter. UBS reiterated a Buy rating and raised its price target by $2 to $34.

"We continue to believe that eBay provides a number of paths to value creation: a) improving core operations (supported by structured data & mobile); b) capital allocation decisions (buybacks, M&A) and potential non-core asset monetization; and c) further value realization for faster growing businesses (StubHub, Classifieds)," analyst Eric Sheridan wrote in a note.

Sheridan expects the debate on structured data to increasingly shift from "if" it will be successful to the slope of forward progress despite a 12-24 month road ahead of investing in growth.

Related Link: eBay CEO Agrees With Part Of Buffett's 'Corporate Governance' Action But For Different Reasons

The analyst is positive on StubHub generating 35 percent GMV growth and 40 percent revenue growth (FX-neutral); acceleration in the Marketplace business; and approval of an additional $2.5 billion stock buyback.

"We were less positive on: a) active buyer growth of only 4% YoY (despite ~200 bps easier comp); b) marketing services growth decelerating 800 bps ex-FX vs. Q1 (on lower ad load/monetization & shift to mobile); & c) upward pressure on product development opex (though mgmt. comments clearly point toward growth initiatives as driver)," Sheridan noted.

That said, the analyst raised his 2016 and 2017 EPS forecast to $1.90 (from $1.87) and $2.11 (from $2.10). Consensus estimate calls for earnings of $1.86 a share for 2016 and $2.03 a share for 2017.

"Despite a recent improvement in stock performance (1176 bps vs SPX since Jun 30th), we still see a solid risk/reward skew to the upside that could result from the right mix of growth and s/h returns driving a re-rating of the shares," Sheridan added.

Jul 2016Morgan StanleyMaintainsUnderweight
Jul 2016Canaccord GenuityMaintainsHold
Jul 2016Cantor FitzgeraldMaintainsHold

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