5 Wall Street Firms Slash eBay (EBAY) Rating Amid PayPal Spin-Off

To the surprise of many, Wall Street is not overly enthusiast about eBay's (NASDAQ: EBAY) plans to spin-off PayPal after initially resisting the idea. In fact, the Street is quite pessimistic amid the news. The stock has been downgraded by 5 Wall Street firms since news broke about the split yesterday - one immediately following the news and four this morning.

• Jefferies downgraded from Buy to Hold while maintaining a price target of $59.00.
• JPMorgan downgraded from Overweight to Neutral with a price target of $61.00 (from $56.00).
• Wedbush downgraded from Outperform to Neutral with a price target of $62.00 (from $65.00).
• JMP Securities downgraded from Market Outperform to Market Perform and removed its price target (prior $58.00).
• Canaccord Genuity downgraded from Buy to Hold.

Overall the calls centered around valuation, with many saying the separation is now priced into the stock with shares up 7.5% yesterday, not to mention the 2.5 months of activist involvement from investor Carl Icahn.

Wedbush analyst Gil Luria, who also removed the stock from the Best Ideas List, said while the spin-off will help the market assign more accurate valuations for both PayPal and eBay Marketplaces, they "do not see benefits to the PayPal business from the spin-off and expect some profit leakage to eBay, as well as dis-synergies." It was added, "Given the more favorable structure to BABA vis-à-vis Alipay, we would expect a commercial agreement between PayPal and eBay to be somewhat less favorable to PayPal compared to the current presentation of the profit split. We expect management to assign as much of the economics to PayPal as possible given the higher multiple, but believe that will still be less favorable than the current presentation."

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