UBS Downgrades eBay, Citing Full Valuation

Shares of eBay Inc EBAY have gained more than 40% since the start of 2019 and now properly reflect the value of its assets, according to UBS.

The Analyst

UBS analyst Eric Sheridan downgraded eBay from Buy to Neutral with a $42 price target.

The Thesis

Breaking down eBay by segment, valuing each unit as its own entity, suggests the stock is fairly valued, Sheridan said.

Specifically, the Classifieds Group should be valued at 14 times Adjusted 2020 EBITDA and StubHub at 12 times, which implies at current value the core Marketplace trades at 8.8 times 2020 EBITDA.

This implies the core business boasts a premium to the e-commerce peer group and leaves minimal room for further expansion, Sheridan said.

Meanwhile, eBay's core Marketplace business continues to operate without clarity on when it can return to positive U.S. gross merchandise value (GMV) growth after recent underperformance, the analyst wrote.

The stock already prices in expectations for a spin-off of Classified Group and/or StubHub, Sheridan said.

In fact, if eBay's management reports to investors in the coming months it won't spin off any of its businesses it could be perceived as "disappointing" and presents a risk to eBay's stock at current levels.

Price Action

Shares of eBay were trading flat Wednesday afternoon.

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