The Bull Case For eBay In 2017

Credit Suisse has said eBay Inc (NASDAQ: EBAY)’s fiscal 2017 guidance, driven by potential benefit seen from structured data, offers a reason for bulls to be optimistic about a recovery.

Quarterly Report

EBay, which reported strong fourth-quarter numbers, sees first-quarter revenue and adjusted EPS of $2.17 billion to $2.21 billion and $0.46 to $0.48, respectively. For FY 2017, the company expects revenue and adjusted EPS of $9.30 billion to $9.50 billion and $1.98 to $2.03, respectively.

“With FY17 guidance contemplating accelerating volume due to the benefits mgmt. expects to see with structured data, we believe EBAY bulls will have a renewed sense of belief in a recovery thesis,” analyst Stephen Ju wrote in a note.

Ju expects first-quarter revenue of $2.26 billion, while pro Forma EPS stands at $0.47. The analyst also raised his net revenue and adj. EPS projections for FY 2017 to $9.46 billion/$2.06 from prior estimate of $9.23 billion/$2.09.

Further, Ju noted that the potential take rate increase through PLA and/or conversion rate improvement will boost revenue and free cash flow significantly for eBay.

Rating And Forward Thinking

However, Ju maintains his Neutral rating and he looks for the following events to become more constructive on the stock:

1. “Sustained GMV growth acceleration through ongoing conversion rate improvements.”
2. “Take rate improvements via reduced use of contra (as the rise in conversion makes this increasingly unnecessary) as well as improvements in promoted listing ads.”
3. “Continued share repurchase activity.”

Shares of eBay closed Wednesday’s trading at $30.23. In the pre-market hours Thursday, the stock is up 6.68 percent to $32.25. Ju upped his target price by $2 to $35.

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