Wedbush Downgrades eBay (EBAY) to Neutral

Wedbush downgraded eBay (NASDAQ: EBAY) from Outperform to Neutral with a price target of $62.00 (from $65.00). The stock was also removed from its Best Ideas List. Yesterday eBay said it would spin off PayPal. Analyst Gil Luria we believe shares are now more fully reflect the value of PayPal.

"We believe the spin-off of PayPal will help the market assign more accurate valuations for both PayPal and eBay Marketplaces. We believe growth, profitability, and dominant market position of PayPal will become more evident as a standalone business and thus receive a higher valuation multiple. We also believe that as a standalone company, eBay would be in a position to return cash to shareholders in the form of dividends and buy-backs," said Luria.

"However, we do not see benefits to the PayPal business from the spin-off and expect some profit leakage to eBay, as well as dis-synergies. 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," added the analyst.

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 $56.63 yesterday.

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