eBay (EBAY) Impresses Wall Street in Q3; Where Do we Go from Here?
Goldman Sachs' Heath Terry - "eBay reported 3Q revenues of $3,404mn (+14.8% yoy vs. 23.1% in 2Q) and non-GAAP EPS of $0.55 versus our estimates of $3,425mn and $0.53. Organic revenue growth was +18%, in line with 2Q. With strong organic growth and margin expansion in both businesses, despite tougher comps, the stock trading at 17X 2013 non-GAAP EPS, over $5 per share in net cash, and significant option value from point of sale payments, mobile, and traditional retail partners, we continue to believe that eBay represents the best value proposition in our coverage." Maintain Conviction Buy List rating, $56 price target.
Wells Fargo's Matt Nemer - "eBay reported a slight Q3 EPS beat versus our estimate and consensus, driven by strong results in both the Marketplaces and Payments segments and a lower tax rate vs. our estimate. We were particularly encouraged by the acceleration in active user growth (up 10%, the fastest growth since 2007) and in U.S. GMV growth, as well as the relative strength in International GMV growth, especially given the macro issues in Europe. eBay appears to be getting traction from changes to the user experience, and a strategic focus on mobile (800,000 new mobile users in Q3), which leaves management "feeling better going into this holiday than they have in a while." Our estimates, however, remain unchanged for this year and only increase slightly for next year, as the company plans to reinvest in technology, marketing, and the customer experience (we are also incorporating eBay's recent debt offering into our model, which impacts EPS by $0.02 in FY2012). Maintain Market Perform, target from $40-$42 to $48-$50.
Needham & Company Kerry Rice - eBay posted solid in-line 3Q12 results, but we believe upside was expected. While management raised 2012 guidance by increasing the low end of its guidance range, we believe upside opportunity exists given the accelerating U.S. core GMV and active users. PayPal continued to grow with solid results driven by increased merchant coverage and share of checkout. Margins improved across all businesses. We also believe that mobile transactions increase the upside potential in 4Q12. Maintains Buy, raises price target from $52 to $55.
Baird Colin Sebastian - Results in line with our expectations. eBay reported a decent Q3, consistent with our estimates, with revenues meeting consensus and EPS slightly above. While the company has reported more upside in recent prior quarters, we note that management commentary matched our checks and eBay Tracker, which had identified some weakness in August. Nonetheless, key metrics were generally solid, including accelerating user and U.S. GMV growth. No change to our positive thesis, and we recommend adding to positions on any pullback. Maintains Buy rating, $58 price target.
Canaccord Genuity Michael Graham - eBay reported impressive results demonstrating stable growth across its businesses. Q4 guidance was somewhat muted, but likely conservative. Most of the stock’s move over the past year has been multiple expansion, with some help from estimates. Our upside scenario suggests metrics need to stay at these high levels next year to see significant stock price appreciation from here. Maintain Hold, price target from $44 to $50.
Nomura Brian Nowak - "Last night, eBay reported solid 3Q:12 results, showing strength in both of its core businesses. Adjusted EPS of $0.55 beat consensus of $0.54, but was 2 cents shy of our Street-high $0.57. PayPal revenue of $1.37bn (up 23% YoY) was in line with the Street, but 2% below us owing to higher-than-expected transaction loss from heavy investment in new channels with higher initial loss rates. Marketplaces posted another solid quarter, with 16% core N. American GMV growth (vs our 14%). The 30% two-year stacked growth was the highest in eBay history driven by the most new users added ever (+3.5mn) and more wallet share gains. eBay revised its FY 12 EPS guidance, now expecting $2.32-$2.35 (from $2.28-$2.33). Despite the revisions, we continue to see potential upside to eBay’s guidance and Street expectations. FY12E EPS from $2.46 to $2.42; FY13E EPS from $3.0 to $2.96." Maintain Buy, target goes from $60 to $59.
Compass Point Douglas Greiner - "Following 3Q'12 results we reiterate our Neutral rating. Our revised estimates are $2.36 this year from $2.33 previously and $2.74 next year from $2.68 previously. 3Q'12 Adjusted EPS of $0.55 was a penny ahead of both our forecast and the consensus. The company raised the lower end of full year revenue guidance from $13.8-$14.1 billion to $13.95-$14.1 billion and raised full year Adjusted EPS guidance from $2.28-$2.33 to $2.32-$2.35. Technology is changing the way people shop and pay, as well as the way brands compete. Around the globe 2 billion new people are expected to use the internet for the first time over the next 3-5 years. eBay is at the forefront on the new model and chasing share of the $10 trillion retail market. However, while the trends are favorable and earnings have momentum, the shares aren't particularly cheap at 18x our estimate of this year's Adjusted EPS plus net cash. Year-to-date the share price has appreciated +59%, and 2012 is only a trial and error year for the offline PayPal opportunity." Maintains Neutral, $48 price target.
Evercore Partners Ken Sena - "Easing marketplace GMV comparisons, strong active user growth metrics, and expanding margins across all of its business segments cause us to view eBay shares as increasingly compelling. Our Equal-Weight rating takes into account whether we can expect to see additional outperformance from a recent site redesign, check-out enhancements, and various mobile initiatives, where we find ourselves to be growingly optimistic." Maintains Equalweight, ups price target from $52 to $54.
Wedbush Gil Laria - "Improved customer experience, the shift to mobile and focus on top sellers continue to bear fruit for Marketplace. Marketplace grew 13% YoY constant currency. Structural changes to Marketplace continue to yield positive results as active user growth experienced the fastest growth rate since 2007 at 10% YoY. Fixed-price GMV grew 20% YoY and represented 66% of total GMV in Q3, and US non-Motors GMV grew 16%, an acceleration to a recent high. We believe these trends will continue as new marketing campaigns attract new users and merchants adopt EBAY as an online partner." Maintain Outperform, $60 price target.
Deutsche Bank Ross Sandler - "Overall, the tone of the conference call and the underlying metrics were positive. The recent site redesign and tailwind from mobile commerce could allow the marketplace business to post upside in 4Q12. We are increasing our 2013 revenue and EPS by 3% and 1% respectively, and maintaining our $55 price target. eBay is one of the few large cap Internets that has successfully executed a turn-around, and at 21x EPS, our optimism is reflected in the valuation... Maintains Hold, $55 price target.
Cantor Fitzgerald Youssef Squali - "As the U.S. business continues to show incremental strength, macro headwinds, particularly out of Europe, are causing international Payments and Marketplaces' growth to slow down. This is likely to keep overall eBay's growth in check until these headwinds ease, or new initiatives start taking hold. We view the point-of- sale payment opportunity as potentially a game changer for Paypal, but it won't start having a material impact on growth forecast until FY:14, by our estimate. At $48/share, we find the valuation full, catalysts to drive near-term upside lacking..." Maintains Hold rating, $48 price target.
Topeka Victor Anthony - "eBay reported an overall decent quarter, with a slight miss on revenues, a penny beat on EPS, and 4Q12 guidance that was lukewarm against high expectations, given the strong year-to-date performance in the stock price. North American non-Vehicles GMV growth accelerated 2 percentage points to 16%, and is growing in-line with the industry. It is now fair to say the business has successfully turned. PayPal continues to perform strongly and within expectations, Bill Me Later is increasing its penetration within PayPal, and GSI Commerce is benefiting from synergies, with better than expected performance at its core e-commerce business." Maintain Hold, price target up from $47 to $48.
Benchmark Daniel Kurnos "We view these results as affirmation that the Marketplaces turnaround is indeed sustainable, and maintain our stance that potential upside from the Payments segment in 2013 remains understated with regards to both forward estimates and the current share price." - Maintain Buy, $58 price target.