BofA Raises eBay's Price Target Citing Multiple Tailwinds

eBay Inc EBAY faces tailwinds in the back half of 2020 and beyond, including the sale of its Classifieds segment and the full launch of its Managed Payments platform, according to BofA Securities.

The eBay Analyst: Justin Post maintained a Neutral rating for eBay, raising the price target from $52 to 62.

The eBay Thesis: The Wall Street Journal reported eBay is in “advanced talks” to sell its Classifieds segment to Adevinta, while Bloomberg in May had estimated the deal to be valued at between $8 billion and $10 billion, Post said in the note.

Assuming a $9 billion deal and a 20% tax rate, the proceeds will be $7.2 billion, which will enable eBay to buyback 124 million, taking its 2021 pro forma share count to 556 million.

Post mentioned that deducting profits generated by the Classifieds segment and considering the reduction in share count, the impact of the deal will be accretive to eBay’s earnings by 9 cents per share in 2021.

On the other hand, eBay’s operating agreement with Paypal Holdings Inc PYPL has expired, clearing the way for the full launch of its Managed Payments platform. Post estimates payments revenues of around $400 million in the second half of 2020 and $850 million in 2021.

EBAY Price Action: Shares of eBay had declined by 3.8% to $56.24 at the time of publication Tuesday.

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