3 Analyst Takes On eBay After 'Big Improvement' In Q1

Online e-commerce platform eBay Inc (NASDAQ: EBAY) reported first-quarter results Wednesday that were highlighted by a lift in gross merchandise value due to the coronavirus pandemic. 

Here's how three Street analysts reacted to the print. 

The eBay Analysts

Morgan Stanley Brian Nowak maintained an Equal-weight rating on eBay's stock with a price target lifted from $35 to $38.

BofA Securities Justin Post maintained at Neutral, price target lifted from $42 to $44.

KeyBanc Capital Markets analyst Edward Yruma maintained at Overweight, unchanged $47 price target.

Morgan Stanley: eBay Growth Accelerating 

Gross merchandise volume rose in the first quarter and accelerated in April to 20% on a year-over-year basis, Nowak said in a Thursday note. 

Encouragingly, the acceleration expanded from categories that cater to at-home living to "virtually all categories," the analyst said. 

Yet eBay could be benefiting from near-term tailwinds that may not sustain over time, he said. Some of these include consumers spending their $1,200 stimulus payment and Amazon.com, Inc. (NASDAQ: AMZN) prioritizing essential categories, Nowak said. 

Other reasons to hold a cautious stance on eBay include its higher exposure to middle-to-lower-income households, according to Morgan Stanley. Amazon, on the other hand, has a higher exposure to households making more than $50,000 per year.

BofA: Classifieds A Q2 Headwind For eBay

The online marketplace guided its Classified unit to experience a 30% to 40% revenue decline in the second quarter versus prior projections of 4% growth, Post said in a Thursday note.

Most notably, the Auto sector is seeing headwinds across the world from dealership closures and declining auto spend, the analyst said. 

Expectations for a slowdown could negatively impact a potential sale of the unit, although management said it is "holding active discussions" with several entities and should have an update by the middle of 2020, he said. 

The core eBay marketplace showed a "big improvement," but the duration of any near-term momentum remains "uncertain," according to BofA. 

KeyBanc: eBay's Sustained Growth

Classifieds headwinds from the disrupted auto segment could prove to be temporary, as management deserves credit for waiving fees and extending terms to accommodate clients, Yruma said in a Wednesday note. Classifieds should return to positive growth as the auto industry turns around and dealerships re-open, the analyst said. 

Elsewhere, eBay has many levers to pull to generate sustained growth under the leadership of new CEO Jamie Iannone, he said.

The CEO introduced technology enhancements during his tenure at Sam's Club, and investors should expect "more of the same" at eBay, according to KeyBanc. 

EBAY Price Action

Shares of eBay ended Thursday's regular session up 2.05% at $39.83, but were giving back 1.34% to $39.30 in the after-hours session. 

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