Why eBay, Inc. Might Pull Back

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of eBay, Inc.  had a sluggish morning after Evercore Partners downgraded the online auction giant from Overweight to Equal Weight.

So what: Along with the downgrade, analyst Ken Sena reiterated his price target of $58, representing about 12% worth of upside to yesterday's close. Although Sena believes that eBay's valuation remains reasonable, he sees near-term pressure on the stock due to sustained take-rate headwinds.

Now what: According to Evercore, eBay's risk/reward trade-off is pretty balanced at this point. "Our rating revision weighs eBay's large addressable markets and undemanding valuation against the potential for sustained take-rate pressure within Payments and a higher level of investment across segments," noted Evercore. "Moreover, while we do not see valuation risk at these levels, we do suspect the potential for further negative estimate revisions, including its 2015 guidance." With the eBay off about 10% from its 52-week highs and trading at a forward P/E of 15, however, those short-term concerns might be providing patient Fools with a high-quality long-term opportunity.

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The article Why eBay, Inc. Might Pull Back originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends eBay. The Motley Fool owns shares of eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Rich Vernadeau

Ebay's future financial strength lies in PayPal and in having gone global (the dreaded GSP). As does any major corporation, ebay maintains a massive propaganda campaign of "polished PR activities". For numerous reasons, mainstream media isn't bothering to investigate ebay much beyond the surface of whatever press releases ebay gives them or whatever spin some ebay top brass puts out in a speech. It has been said that most ebay buyers are apathetic towards the plight of sellers. Perhaps this is the case. HOWEVER, I do not believe the purges and numerous other egregious actions by ebay can continue to go on indefinitely unnoticed. Somewhere in the thousands of people purged is someone who is an attorney or has a friend who is. Somewhere in the thousands is someone who has a friend who is an investigative reporter at a newspaper or TV station. Somewhere in the thousands are a small group of intelligent articulate people who won't just take it sitting down, they will in fact call attorney generals offices in the states wherein they reside, they will in fact call the FTC, they will in fact call the SEC, they will in fact- and many already have been- engage in blogging across the internet about what ebay is doing. Ebay is not invincible. The right combination of interested or authorized regulatory authorities just hasn't come together yet with the facts of what is going at ebay. Nixon managed to forestall the Watergate scandal over a two-year period but it gradually unfolded- slowly at first and then it gained incredible momentum. And that's the U.S. government at the Presidential level. I cannot believe that ebay is more powerful than that.

December 04 2013 at 12:56 PM Report abuse rate up rate down Reply