Friday, January 21, 2011

eBay (Nasdaq:EBAY) Risk/Reward Where it Should Be

While eBay (Nasdaq:EBAY) reported a great quarter and bumped up guidance, Canaccord said they still see risk/reward reflecting where the company now is, and remain "Neutral" on eBay.

Canaccord said, "eBay reported Q4 results that shattered expectations on holiday seasonality, international strength and better performance from its Marketplaces and PayPal divisions. Revenue grew 4.2% year over year, up from 3.4% in Q3, with 59% of revenue generated internationally. Impressively, PayPal revenue grew 22.1% year over year, up from 21.8% last quarter. While total payment volume (TPV) growth decelerated to 26% (international TPV makes up 43% of total), eBay penetration came in at an all-time-high of 70.0%, and the Payments segment margin was a solid 22.1%. Payments now constitute 38% of eBay’s total revenues, up from 35% (ex-Skype) in 2009. Active user growth accelerated to 95 million, an increase of 4.9% year over year, up from Q3’s 4.5%. Sold items were up 10% year over year versus 9% in Q3. PayPal finished the year with over 94 million active accounts (17% year over year), with outside-the-U.S. business at nearly 50% of PayPal’s revenue in Q4. Management guided full-year revenue and EPS above consensus, predicated on a stabilizing macro environment, and expected recovery in Marketplaces, bolstered by sustained strength in Payments. Though eBay should benefit from secular trends, Canaccord Genuity Technology Analyst Heath Terry believes the risk/reward is balanced at these levels given slower-than- expected restructuring of the core U.S. eBay business and competition. He remains neutral on the name."

eBay was trading at $30.16, down $0.62, or 2.01 percent, as of 2:18 PM EST.

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