EBay: Slow Progress Better Than No Progress

Shares of eBay Inc EBAY were trading lower by 4 percent Thursday morning as the company's third-quarter earnings report showed a slower than expected improvement in revenue. But in eBay's case, a slower than expected improvement is better than no improvement, said Bank of America's Justin Post. Post maintains a Buy rating on eBay's stock with an unchanged $40 price target as the company's earnings report should be viewed positively. The company did show an acceleration in gross merchandise value and margins came in ahead of expected. However, management's fourth-quarter guidance and commentary was a "letdown" given the stock's recent gains and strong management commentary heading into the print. Related Links: Want To Invest In E-Commerce? Check Out These 5 Ideas 10 Stocks To Watch For October 19, 2017 _______ Image Credit: Christian Engelstoft [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

As a whole, eBay's top-line trends are "slowly" accelerating which does leave opportunity for multiple expansion during a bull market, the analyst said. Also, an improvement to eBay's platform coupled with an aggressive marketing campaign could result in incremental acceleration.

"Getting organic traffic conversion higher is key to the story in 2018, and eBay plans to launch new search and user interface experiences to drive further improvement, which we think is possible," the analyst said (see his track record here).

Finally, heading into 2018 and 2019 eBay's operating margins will likely stabilize and share buybacks could help drive a low-double-digit earnings per share growth over the same period. As such, the case for owning eBay's stock remains unchanged.