3 eBay Analysts On Q4 Beat, Valuation, 'Compelling Growth' In Shoes, Watches

E-commerce platform eBay Inc EBAY reported Wednesday afternoon with fourth-quarter results that came in better than expected, but two Wall Street are staying neutral. 

The eBay Analysts

Morgan Stanley analyst Brian Nowak maintains an Equal-weight rating on eBay's stock with a price target lifted from $58 to $63.

Raymond James analyst Aaron Kessler maintains a Market Perform rating on eBay's stock.

KeyBanc Capital Markets analyst Edward Yruma maintains an Overweight rating on eBay's stock with a price target lifted from $65 to $80.

Morgan Stanley: eBay Has Uncertain Outlook

The stronger-than-expected quarter was highlighted by a 4% gross merchandise volume beat, a 3% revenue beat and an approximate 4% EPS beat, Nowak said in a note.

Encouragingly, eBay guided to a "solid start" to the new fiscal year, as the high end of management's first-quarter revenue guidance was 7% higher than expected, the analyst said.

Also, eBay is expecting GMV growth (excluding forex) in the low 20% range versus prior expectations of 7% growth, he said. 

Yet eBay also noted its longer-term outlook is less clear amid  unclear economic reopening progress, Nowak said.

As such, eBay's GMV could fall anywhere from down 9% to down 13% from the second quarter through the first quarter of 2022.

"In a world where investors are concerned about AMZN and other e-commerce players' growth decelerating by 30+ percentage points in 2Q:20, we struggle to believe investors will give EBAY the benefit of the doubt until we see the actual March/April data," the analyst said. "But the opportunity and drivers are in place to monitor."

Related Link: Here's Why eBay, PayPal, Ocugen And Kodak Are Moving

Raymond James Says eBay's Valuation A Concern

The four main positive takeaways from eBay's report take a backseat to valuation concerns, Kessler said in a note.

The positives include:

1) GMV growth remained strong at 18% FX neutral and 25% in the U.S.

2) Managed payments increased to over 38% of on-platform volume versus around 20% in the third quarter.

3) Promoted listings revenue growth increased (FX neutral) 57% and topped $1 billion in total advertising revenues.

4) Management's GMV guidance for the first quarter in the low 20s implies an acceleration from the fourth quarter.

Despite a strong quarter and encouraging guidance, eBay's stock is fairly valued at around 9 times 2021E EV/EBITDA, according to Raymond James. 

Why KeyBanc Sees Sustainable Growth At eBay

The company deserves credit for operating with a "heightened sense of urgency" and "greater tactical focus," Yruma said in a note. Led by CEO Jamie Iannone's tech-first vision, the company showed tangible results in its fourth-quarter report, the analyst said. 

Most notably, eBay's advertising and payments businesses are fueling the growth, he said.

This prompted management to guide towards "at least" an incremental $2 billion in revenue and $500 million in operating income in 2022, but these figures could prove to be conservative, Yruma said. 

The company's new vertical focuses on watches and shoes, which represent "compelling growth opportunities'' and target clients that would typically spend a lot on the platform, the analyst said.

Specifically, he said the average customer who bought a pair of sneakers over $100 spent a total of $2,500 on eBay.

EBAY Price Action: Shares of eBay hit a new 52-week high of $64.85 Thursday morning and were up 6.29% at $61.69 at last check.