Ebay: We Find It Hard To Recommend The Shares At This Valuation, Says RBC’s Mark Mahaney

RBC Capital analyst Mark Mahaney is weighing in with a few insights on Ebay Inc (NASDAQ:EBAY), following the company’s fourth-quarter results, posting revenue of $4.92B, which is relatively in-line with RBC & The Street. The analyst reiterated a Perform rating on the stock, and slightly raised his price target to $58 (from $55), which represents a potential upside of 9% from where the stock is currently trading.

Mahaney wrote, “Maybe EBAY will be the YHOO of ’15 – YHOO traded up 25% in ’14, largely due to BABA IPO expectations. We do believe there is the opportunity for the spin(s) to unlock value. But in the meantime (until H2:15), we believe the market could be in an EBAY wait-and-see mood. Current fundamental trends are weaker than expected, even accounting for FX, which will be a material headwind for ALL Large Cap Nets this EPS season.”

The analyst continued, “The Payments segment appears very top-line strong, but the investments required to drive this growth have likely been greater than anticipated. And Marketplace segment growth is clearly deteriorating, and we continue to be concerned that competition is becoming an acceleratingly difficult challenge. EBAY management stated on the EPS call that Marketplace trends will get worse before they get better. Until material uncertainty is removed re: the latter clause, we find it hard to recommend the shares at this valuation.”


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