eBay (EBAY) Estimates Lowered at Wells Fargo

Wells Fargo maintained an Outperform rating on eBay (NASDAQ: EBAY) and reduced its price target to $61-$63 (from $63-$65). The change reflects a recent security breach and changes to Google's search algorithms.

"After closely following the Target security breach, we believe that eBay faces some near-term risk of customer churn (we’ve already seen over 1K negative comments on Facebook) and could incur incremental costs to respond. We would expect to see some deterioration in the next SSS update from Channel Advisor, which will be released early to mid-June. We are lowering our 2014E/2015E EPS to $2.87/$3.21 from $2.95/$3.30 and our valuation range is now $61-63 (from $63-65). While we are lowering our near-term estimates (with the biggest impact occurring in Q2), we still view the long-term risk/reward as favorable given EBAY’s dominant high growth payments franchise, reinvented global marketplace business and healthy FCF/share buyback," said Nemer.

"Google has also competed a change to its search algorithm that is reportedly designed to filter out lower-quality sites that don’t have original content, which could impact the ranking for some eBay landing pages. Channel advisor reported that search rank had dropped by 3.88 places, although it isn't clear how broad their analysis is but we think this could drive lower traffic to the site for the foreseeable future. We’re still assessing the potential impact," he added.

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 $51.77 yesterday.

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