Jefferies Pounds Table on eBay (EBAY); Sell-Off on Third-Party Data, New Fees Overdone

March 20, 2013 10:03 AM EDT
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eBay (Nasdaq: EBAY) is expected to hold its 2013 Investor/Analyst Day on March 28th and at least one analyst firm thinks it might be a good idea to buy in ahead of the event.

Jefferies' U.S. Internet Team sees eBay management updating on PayPal off-line initiatives, volume growth efforts through GSI, plans to improve user/seller experiences in Marketplace, and mobile transformation as it relates to eBay and the broader e-commerce segment.

Concerns investors have had recently include a new MasterCard (NYSE: MA) fee for digital wallets as well as third-party data suggesting a slowdown in Marketplace growth. Jefferies thinks the recent dip is an overreaction in that: "1) 3rd party data was distorted by 2012 being a leap year, 2) new MA fee was factored into guidance, and 3) our ests show the new fee will be levied against less than 20% of PayPal TPV."

Jefferies also ran a fee scenario for MasterCard. With a 20 to 25 basis points fee, eBay could see impact on EBITDA/EBITDA margin by $60 million to $70 million and 0.4 percent to 0.5 percent, while EPS will be lower by 3 to 4 cents. A similar fee by Visa (NYSE: V) could hurt EBITDA/EBITDA margin by $125 million to $136 million and 0.8 percent to 0.9 percent, and EPS to the tune of 7 cents to 8 cents. Jefferies notes that the new MasterCard fee has been factored into guidance and management believes it is going to be immaterial. In addition, there has not been any indication by Visa that it is planning a similar move.

On ChannelAdvisor (CA) data, which reported growth of 8.2 percent in comps during February, from 19.7 percent the prior year and 18.8 percent in January 2013, Jefferies noted that the leap year took away about 4 percentage points from the results. The firm comments:

Getting deeper into the details shows that the deceleration in growth came largely from eBay Motors (Parts & Accessories) which grew +6.8% Y/Y in Feb’13 (vs. +21% to +58% range, historically). It should be noted that Motors is generally a bit seasonal and weather related. As CA highlighted, February snowstorms (4-5 in the MW and NE regions) likely had a material impact. We would also like to highlight that eBay's fixed-price SSS were up 15.6% Y/Y (vs. +26.9% in Jan'13, +29.7% in Dec'12, +26.8% in Feb'12, and +18.0% in Jan'12).

Jefferies has eBay at Buy with a price target of $62.

For an analyst ratings summary and ratings history on eBay click here. For more ratings news on eBay click here.

Shares of eBay closed at $51.10 yesterday.

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