Headwinds in eBay Inc’s International Market Drive eBay Down – Morgan Stanley
Morgan Stanley lowered ratings on eBay Inc (NASDAQ:EBAY) stock from an Equalweight to an Underweight and maintained $22.50 target price, signaling 11% downside potential. Analyst Brian Nowak noted headwinds in eBay’s international market and sluggish top-line growth, and budding negative revisions.
Investor concern lies in the e-commerce retailer’s decelerating domestic market business; domestic business accumulates approx. 40% gross merchandise value (GMV) and contributes 36% in total revenues. However, Morgan Stanley highlighted eBay’s weakening foothold in international markets. While eBay’s international market generates approx. 60% of total GMV and 44% revenue, it is likely to lose market, especially in the UK and Germany in the near future.
Considering how the UK’s and Germany’s combined international GMV is 62%, Alphawise survey holds concerning data pointing at this market share erosion. As per survey data, the UK/ Germany consumers not planning to shop on eBay have increased from 20% at 2015 start to over 60% in 2016. Also, 95% of UK buyers and 98% of Germany buyers at eBay expect flat or lower spending over the year. From this information, Mr. Nowak concluded that eBay is at risk of dip in net buyer worth as well as dollar spent per buyer.
He also mentioned that Amazon provides solid competition, reducing eBay’s uniqueness in product offering. “We now see 1%/4% negative revision risk to Street non-GAAP EPS. eBay is not an expensive stock relative to its retail or online advertising peers, but we do not view valuation alone as a catalyst….in particular with decelerating top-line growth and top- and bottom-line negative revisions to come,” he added.
Analysts’ consensus recommendation is a Hold, with mean rating of 2.51. According to a Reuters report, out of total analysts covering the stock, eight rate eBay stock a Buy, 24 suggest a Hold while none rate it as a Sell. Five analysts rated the stock an Overperform while two labeled it an Underperform.