RBC Capital Downgrades eBay (EBAY) to Sector Perform

RBC Capital downgraded eBay (NASDAQ: EBAY) from Outperform to Sector Perform with a price target of $55.00 (from $62.00) following in line Q3 results, and a slightly lower 2014 Top line and EPS outlook.

Analyst Mark Mahaney cited three reasons for the downgrade: "First, the Spin Is In…which means that the PayPal Spin catalyst has come and gone. We do believe there is the opportunity for the spin to unlock value, particularly by incentivizing greater opportunity/execution at PayPal. But in the meantime (until H2:15), we believe the market will be in an EBAY wait-and-see mood. Second, current fundamental trends are weaker than we expected, which is causing us to lower estimates..and hence our PT. The Payments segment appears very top-line strong (especially in the key Merchant Services area), but the investments required to drive this growth have been greater than we anticipated. And Marketplace segment growth is clearly deteriorating, and we are concerned that competition may soon become an acceleratingly difficult challenge. And third, we believe that EBAY (both the Payments and Marketplaces segments) is entering what may be a sustained investment period with both material marketing and product development spend. Given rising competitive challenges (Apple Pay, Amazon Same Day Delivery, International marketplace competition), we think these sustained investments are likely the right move. But the uncertain payoffs will likely create a pause for most EBAY investors."

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 $50.24 yesterday.

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