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This morning, UBS issued an upgrade to eBay (NASDAQ: EBAY) - upping the online auction house to Buy from Neutral. The brokerage believes that the company's comparable sales may be starting to "turn a corner." Backing this belief is recent data from a top vendor and "other channel checks." The vendor, ChannelAdvisor, reported that its comparable sales increased 4.6% in August. The increase followed a 10% decline in the first quarter and a 5% drop in the second quarter. ChannelAdvisor also reported that upcoming changes should help drive transaction growth. These changes include enhancements to eBay's search function and better dispute resolution tools.
Technically, eBay has performed well this year as the stock seems to have bottomed in March and is now on a march higher. This morning's news should help further this trend, but I am a bit concerned about some long-term resistance. eBay's 50-month moving average lurks overhead, descending through the $26 region. While this trendline could turn the stock away, the good news is that the equity is even challenging the 50-month moving average. The last time the stock was anywhere near this trendline was back in early 2008 -- so there is a silver lining to this potential cloud.
Fundamentally, I agree with the upgrade. Think about it, we are heading into the Christmas shopping season and thrifty consumers will be looking to get the best gifts possible for the least amount of money. What better place than an online auction house? Yes, there are caveats to purchasing items through an online auction house, however, the biggest benefit is lower price -- and that is what will drive sales as wary retailers get back into the buying game.
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