Youssef Squali Believes eBay Inc Could Be Primed to Beat Out the Street in Tonight’s 4Q:17 Showcase

SunTrust's Youssef Squali says this online auction giant is in good standing, thanks to a robust macro backdrop.


As the latest round of Internet earnings season rolls forward, eBay Inc (NASDAQ:EBAY) is up next, poised to dole out a fourth quarter print this evening as soon as the bell tolls. It seems that the time-old adage that ‘you reap what you sow’ is about to pay off in a big way for the online auction giant. One bull bets that growth initiatives kickstarted two years prior are revealing strides forward for eBay, and as such, he believes the full-year 2018 guide will mirror more progress ahead.

Top analyst Youssef Squali at SunTrust is banking on this internet player’s success, finding the risk/reward for the stock to be “compelling” ahead of tonight’s turnout.

In a positive quarterly preview, the analyst reiterates a Buy rating on EBAY stock with a price target of $46, which implies a close to 14% upside from where the shares last closed.

Results should meet consensus expectations, Squali bets, which will be indication “that progress on initiatives started 2 years ago to revive top-line growth through improvements in structured data, machine learning, user experience and merchandising, continue.” Moreover, the analyst anticipates “FY18 guidance to reflect further improvement in Y/Y growth in GMV, with positive commentary on capital allocation, given the likely repatriation of most of ~$8.7B cash overseas.”

Likely to benefit from what has shined as a “strong holiday season for eCommerce,” the analyst calls for a 9.6% year-over-year rise in revenues to $2,625 million for eBay along with $0.61 in non-GAAP EPS. Should Squali prove correct, these results would hit the tail-end of the giant’s own guide while likewise aligning with FactSet consensus expectations calling for $2,612 million in revenue and $0.59 in non-GAAP EPS. For context, eBay management has set guide expectations for $2.58 to $2.62 billion in revenues and EPS between $0.57 and $0.59.

“We believe eBay is in position to meet, possibly slightly exceed our/Street expectations, helped by a strong macro environment, which drove better than expected holiday season, with aggregate U.S. online sales up 14.6% Y/Y (Adobe),” writes Squali.

Additionally, “We expect Marketplace to continue to underperform relative to overall ecommerce, however, eBay has the potential to show further Y/Y FXN growth improvement as the structured data initiative, enhanced buying/selling experience, and brand marketing campaign launched in earnest in 4Q17, begin to have the desired impact,” highlights the analyst, calling for “stable” marketplace gains and some steps forward from StubHub.

Compared to the third quarter performance of Marketplace gross merchandise volume (GMV) that grew 8.5%, the analyst calls for 8.1% growth. However, compared to StubHub’s GMV growth of 2.0% in the third quarter, the analyst predicts a 5.0% rise for the fourth quarter.

For 2018, the analyst currently angles for $10.4 billion in revenue from the giant, with the Street slightly less bullish at $10.3 billion. Furthermore, on top line growth, Squali hovers above the Street’s expectations, setting a high estimate for 8.2% in year-over-year top line gains against the Street’s 6.5% along with a 7.3% forecast for GMV ahead of consensus of 5.2%. For free cash flow (FCF) for the new year, Squali projects $2.5 billion, just under the Street’s $2.6 billion estimate.

Youssef Squali has a very good TipRanks score with a 73% success rate and a high ranking of #49 out of 4,757 analysts. Squali yields 19.8% in his yearly returns. However, when recommending EBAY, Squali forfeits 1.1% in average profits on the stock.

TipRanks indicates a mostly optimistic analyst consensus circling the online auction giant. Out of 9 analysts polled in the last 3 months, 6 are bullish on eBay stock with just 3 playing it safe on the sidelines. With a return potential of 9%, the stock’s consensus target price stands at $44.13.

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