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eBay after the bell 7-20-06: Magic shmagic!

Do you believe in magic?

Meg Whitman, eBay's CEO, believes in the eBay magic. She wants to restore it. Well, she said it better. She said the SIF (Store Inventory Format) listings growth have "diluted the magic of eBay," and that, "We are trying to get back to the essence of eBay."

Magic shmagic! That was investors' reaction today as the stock resumed its selloff after such positive after hour gains yesterday. The stock declined a whopping 4.9% or $1.27 to close at $24.66. Why? I can only assume that growth concerns still exist, a flat Q3 guidance and the fact that the announced fees increases could upset eBay sellers further at the time they are already upset because of the Google Checkout ban.

From analysts we get (or actually, I don't get much from this mish-mash) the following:
  • Credit Suisse: "With the stock trading at 25 times our 2007 earning-per-share estimate, we believe that valuation has gone well below reasonable and see considerable upside." Maintain "outperform", cutting price target to $45 from $60 because of China and Skype.
  • Global Crown Capital: "It's about as in line as you can imagine [...] I certainly don't see a cause for raising estimates (earnings per share or revenue) for the full year."
  • Stifel Nicolaus: the analyst believes the negative sentiment prior to Q2 was due to concerns about the shift to SIF, but raising fees could create higher commission and faster turnover. He thinks growth might actually accelerate later in the year.
  • Goldman Sachs: Agrees with above: "The fee change could make this quarter mark the bottom in decline of revenue per listing." Left earnings estimate unchanged and $54 target price.
  • Deutsche Bank: Lowered 2006 EPS estimate to 97 cents from 98 cents and 2007 EPS projection to $1.15 from $1.18. Price target was lowered to $26 from $30. "We feel that higher ad spending is clearly necessary for eBay to boost demand and to grow its top and bottom line."
  • Piper Jaffray: "We believe that this is the right strategy but we are concerned that this may further upset sellers and decrease listings without a notable increase in conversions." Cut EPS estimates for 2006 and 2007 and lowered price target to $30 from $31.

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Last updated: October 07, 2008: 08:38 AM

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