The Street's Reaction To eBay's Q2: More Of The Same?

The Street's reaction to eBay Inc EBAY's second-quarter earnings report varies despite the e-commerce platform showing signs of success on initiatives to boost its platform.

The Analysts

Raymond James' Aaron Kessler maintains an Outperform rating on eBay with a price target lifted from $44 to $45.

Morgan Stanley's Brian Nowak maintains at Equal-Weight, price target lifted from $36 to $37.

KeyBanc Capital Markets' Edward Yruma maintains at Overweight, $45 price target.

Shares of eBay hit a new 52-week high of $42 Thursday morning and traded around $39.58 at time of publication.

Raymond James: The Positives

EBay reported an overall "solid" quarter and management discussed how it remains committed to exploring strategic alternatives to improve shareholder value, Kessler wrote in a note.

The three main positive takeaways include Marketplace saw a 200 basis point year-over-year increase in margins, StubHub gross merchandise volume rose 6% from last year and Promoted Listings revenue jumped 130% from last year to $89 million and remains on track to reach the $1 billion milestone in the coming years.

Morgan Stanley: 'More Of the Same'

Despite a revenue beat in the quarter, eBay's report shows "more of the same," Nowak wrote. Specifically, the core eBay business continues to decline and management's initiatives to rationalize costs and ad spend "can only go on so long."

In fact, Nowak said eBay's U.S. GMV is modeled to fall by around 5% year-over-year in the back half of 2019 despite facing easier comps. The company's continued struggles is likely the result of share loss from start-up consumer-to-consumer rivals like OfferUp or even Facebook Marketplace, which the company said is used by 800 million users as of the third quarter 2018.

The competitive landscape could intensify more as traditional retailers "compete harder" online and eBay will likely be put in a situation where it has to invest to grow share. Unless trends notably improve in the near term, Nowak said the research firm's 2020 GMV growth estimates of 1.5% in the U.S. and 4% globally could be overly optimistic.

KeyBanc: Compelling Value Could Be Unlocked

Management said it will continue evaluating how StubHub and Classifieds fit in to eBay's overall portfolio and the company discussed two recent moves to bolster its business, Yruma wrote: The company bought a 5.5% stake in India's Paytm Mall, which will bring its global inventory into one of the country's most notable marketplaces, and the company sold its flash sale German business called brands4friends.

EBay's remaining assets shows the company has the potential to unlock value. The research firms' sum-of-the-parts valuation model (base case) yields a total implied per share value of $48.16.