Send me real-time posts from this site at my email
Alex Cho

eBay Bombs on Guidance: Lowering Price Target to $25.75

eBay more or less bombed on both the guidance on revenue and earnings. The currency risk continues to resurface and for a low-growth company like eBay, the impact was far more material than what the analyst consensus was anticipating. As such, I have to revise my price target to factor in both lower earnings and a lower valuation. I know walking into the quarter I was recommending the company, and in in hindsight it feels like a pretty big bone headed mistake on my part.

Source: eBay

It’s worth mentioning that eBay’s guidance for full-year fell short of the consensus estimate figure of $1.98 for non-GAAP EPS. The company also offered revenue of $8.5 to $8.8 billion, which was below the consensus estimate of $8.99 billion. Of course, the company could surprise in future quarters, but I’m going to operate off of eBay’s outlook figure for sake of simplicity for modeling my next-year results, and also because the company’s earnings surprises are likely to be very modest given the currency impact and separation related charges.

I’m operating off of an $1.88 EPS estimate for next fiscal year, I’m anticipating operational growth to modestly offset the currency impact a little more as eBay does have room to lower some cost drivers in response to a weaker currency environment.

I’m lowering my rating from a conviction buy to a hold rating. I’m lowering my price target from $34.18 to $25.75 for the next 12-months in-light of the guidance revisions and broader weakness in equity prices in general. The stock could be exhibit another 11.2% upside from current levels as volatility will likely subside as we progress through the year.

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue