EBay Stock Is a Buy After Guidance Disappoints, Analyst Says -- Barrons.com

By Angela Palumbo

eBay stock was rising Tuesday after a Bernstein analyst upgraded shares of the online marketplace on confidence that the stock's pullback provides an attractive entry point.

Nikhil Devnani upgraded shares of eBay to Outperform from Market Perform on Tuesday, while maintaining a $70 price target, which implies a 16% increase from the stock's closing price on Monday. This upgrade comes after shares have dropped 9.4% from their 52-week closing high of $67.17 on October 8.

"We couldn't justify an upgrade when the stock was in the mid-to-high $60/share range, but we believe the recent pullback offers a better entry point," Devnani wrote.

EBay stock has been outperforming the broader market. It's up 40% in 2024 compared to the 21% increase of the S&P 500. But shares took a hit on Oct. 31 -- dropping 8.2% -- after the company said it expected full-year revenue to be between $10.23 billion to $10.29 billion, which was below analyst estimates of $10.3 billion.

"Our outlook also contemplates a challenging operating environment due to persistent economic headwinds and several one-off dynamics in Q4, specifically greater consumer attention on US elections, a shorter holiday shopping period this year from Hurricane Milton in early October, " Chief Financial officer Stephen Priest said on the earnings call.

Because these headwinds are "one-off's," and the stock has come down a bit, Devnani sees this as a stock that investors should get in on.

"While growth rates at EBAY aren't heroic, we believe proving to the Street that it is a 'steady grower' and not a 'melting ice cube' offers room for upside the stock," he wrote. Revenue in the quarter of $2.58 billion increased 3% from the previous year.

One risk to eBay is competition from companies such as Amazon.com and Etsy, and Devnani recognizes that market-share losses could restrict the multiple this stock could get. However, he defends his Outperform rating on the premise that eBay's earnings continue to grow despite competition.

Shares of eBay were rising 1.1% Tuesday to $60.88.

Write to Angela Palumbo at angela.palumbo@dowjones.com

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November 05, 2024 11:44 ET (16:44 GMT)

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