What 5 Analysts Think Of eBay's Mixed Guidance For Q2

eBay Inc EBAY shares pulled back sharply after issuing mixed guidance for the second quarter.

The eBay Analysts: BofA Securities analyst Justin Post reiterated a Neutral rating on eBay shares and lowered the price target from $71 to $68.

Morgan Stanley analyst Brian Nowak maintained an Equal-weight rating and a $63 price target.

Wedbush analyst Ygal Arounian downgraded eBay shares from Outperform to Neutral and reduced the price target from $74 to $63.

KeyBanc Capital Markets analyst Edward Yruma maintained an Overweight rating and an $80 price target.

Raymond James analyst Aaron Kessler maintained a Market Perform rating.

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GMV Commentary Adds Uncertainty, BofA Says: eBay reported first-quarter revenues of $3.02 billion and EPS of $1.09, ahead of the Street estimates of $2.97 billion and $1.06, respectively, BofA analyst Post said in a note.

With stimulus benefit in the first quarter, U.S. gross merchandise volume growth was strong at 36% year-over-year, the analyst noted. U.S. revenue growth of 56% was achieved on the back of management payments rollout accelerating to 80% complete in the U.S., he added.

The guidance for a year-over-year decline in gross merchandise volume in the second quarter, with the weakness possibly lasting through the fourth quarter, overshadowed the quarterly results, the analyst said.

"While commentary on tech-led innovation in sneakers, trading cards and other categories suggests underlying progress on eBay, commentary on future GMV will likely add some uncertainty on post-COVID growth rates," Post wrote in the note.

Morgan Stanley: eBay a "Show-me Story": The first-quarter results and the second-quarter guidance were largely in line, Morgan Stanley analyst Nowak said. With reopening uncertainties lingering, eBay remains a "show-me" story, he added.

The analyst noted multiple growth initiatives the company is investing in, that can drive structural growth. Execution is key, he added.

eBay Possibly Heading Into Four Quarters of Negative GMV Growth, Wedbush Says: The outlook on the sustainability of GMV gains during COVID-19 looks to be below Wedbush's expectations, with more limited visibility as mobility increases, analyst Arounian said.

"So we move to the sidelines as we potentially head into four quarters of negative y/y GMV growth," the analyst wrote in the note.

Many of eBay's efforts are still relatively early as it builds out its recommerce efforts, collectible verticals like sneakers and watches, and efforts around authentication to drive a more competitive offering, Arounian said. This, along with improvements in technology, will likely drive a fundamental improvement in the platform, he added.

"While there remain positives to the eBay story vis a vis pre-COVID, we look for more clarity and a better entry point at this stage," Wedbush said.

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Limited Visibility, Tougher Comps May Mask Underlying Platform Improvement, KeyBanc Says: eBay's first-quarter results point to continued benefits from a systematic approach to improving category performance, while driving overall platform improvements, KeyBanc analyst Yruma said.

Visibility into 2021, however, remains somewhat limited and difficult comparisons may mask continued underlying platform improvements, he added.

This, according to the analyst, will help drive sustainable mid-single-digit long-term GMV growth and 35% EBITDA margins in 2022. Additionally, eBay has non-core assets such as Adevinta and Adyen it could unlock to drive shareholder value, he added.

eBay Shares Fairly Valued, Raymond James Says: Despite strong momentum, eBay guided to lower than consensus EPS for the second quarter, and acknowledged potential volume pressure in the second half, Raymond James analyst Kessler said.

This is seen as an offshoot of potential improvement in global mobility post vaccinations and dissipation of the benefit of U.S. stimulus, the analyst said.

"Given slowing momentum and our outlook for low-to-mid single-digit long-term revenue growth, we believe shares are fairly valued," Kessler wrote in the note.

eBay Price Action: At last check Friday, eBay shares were slipping 0.30% to $55.90.

(Photo: eBay)