Starboard Value Sells 74% Stake in eBay; Buy With Target Price of $64

Starboard Value announced that it sold 74% of its stake in an American multinational e-commerce corporation, eBay, during the second quarter when the activist investment firm ended its proxy fight following the hire of Jamie Iannone as the new CEO of the e-commerce company.

According to a regulatory filing on August 14, the New York-based hedge fund held 2,090,000 shares of the e-commerce company, compared to 7,920,000 it reported in on May 15 filing.

eBay reported that its revenue rose to $2.87 billion in the second quarter, from $2.42 billion a year ago, beating market estimate of nearly $2.8 billion. The e-commerce company forecast a full-year adjusted profit between $3.47 and $3.59 per share.

eBay shares ended 0.018% higher at $56.29 on Friday. The stock is up over 40% so far this year.

eBay stock forecast

Twenty-seven analysts forecast the average price in 12 months at $62.32 with a high forecast of $82.00 and a low forecast of $52.00. The average price target represents a 10.71% increase from the last price of $56.29. From those 27, 11 analysts rated ‘Buy’, 16 rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $64 with a high of $71 under a bull scenario and $51 under the worst-case scenario. eBay had its price target upped by stock analysts at Stifel Nicolaus from $68 to $70. The firm presently has a “buy” rating on the e-commerce company’s stock.

Other equity analysts also recently updated their stock outlook. Mizuho upped their target price on shares of eBay to $52 from $46 and gave the stock a “neutral” rating. JPMorgan Chase & Co. upped their target price to $60 from $52 and gave the stock a “neutral” rating. Benchmark upped their target price to $69 from $60 and gave the stock a “buy” rating.

BMO Capital Markets lowered from a “positive” rating to a “market perform” rating and upped their target price for the stock to $59 from $52. At last, Wells Fargo & Co upped their target price to $58 from $50 and gave the stock an “equal weight” rating.

We think it is good to buy at the current level and target $64 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“Near-term trends are strong, and we remain positive payments and ads…but we think execution on eBay’s 3 new growth pillars (for sustained growth into ‘21) will be key to driving material upside from here,” said Brian Nowak equity analyst at Morgan Stanley.

“eBay has shifted its strategy to lower growth and cost rationalization and is aggressively repurchasing shares. New growth drivers, such as Promoted Listings and Payment intermediation (to be rolled out in full mid-2020) are on track.”

Upside and Downside risks

Upside: 1) eBay stabilizes and re-expands its core marketplace GMV. 2) eBay executes better than expected on the payments and promoted listings opportunities, highlighted by Morgan Stanley.

Downside: 1) core marketplace GMV continues to deteriorate. 2) eBay misexecutes on the payments and promoted listings opportunities.

eBay Could Roll Over Into Intermediate Correction

eBay Inc. (EBAY) sold off 3.1% after last week’s Q2 2020 earnings report, despite beating estimates and guiding Q3 and fiscal year above already-aggressive consensus. The stock has since regained those losses but dwindling volume lowers odds it will challenge the July 13th all-time high at 61.06, at least in the short-term. The apathetic tape also indicates that overbought technical readings are taking hold, raising odds for a long-overdue downturn.

eBay Takes Market Share From Competitors

The e-commerce giant has booked impressive market share gains in the digital retail space as a result of the COVID-19 pandemic. Investors and traders have taken note, more than doubling the stock price since the March low while posting a 57% return in 2020. These outsized gains have raised legitimate doubts about valuation while lifting relative strength oscillators into the most overbought levels in the company’s 22-year public history.

In addition to growing technical challenges, eBay got into hot water in June after the U.S. Attorney’s office in Massachusetts indicted former employees for an alleged cyberstalking campaign that targeted the publisher and editor of a newsletter who wrote critical comments. Early evidence suggests that senior executives were involved in the diabolical decision-making, raising the potential for bearish headlines when testimony is taken later this year.

Wall Street And Technical Outlook

Wall Street rates eBay as a ‘Moderate Buy’, based upon 11 ‘Buy’, 16 ‘Hold’, and 1 ‘Sell’ recommendation. That’s positively bearish compared to other e-commerce plays, suggesting that many analysts think the company is now overvalued. Price targets currently range from a low of $52 to a street-high $82 while the stock is trading $6 below the median $62 target. This placement indicates that price could add additional points with ease, despite growing headwinds.

Technically speaking, eBay has fired on all cylinders since breaking out above 2018 resistance at 46.99 in June. The rally has added 10 points since that time while accumulation readings continue to support higher prices. However, a distribution wave that started in July may be picking up steam, perhaps setting the stage for an intermediate correction that offers a low-risk buying opportunity near the breakout level.

eBay Agrees to Sell its Classifieds Business to Adevinta; Target Price $65

eBay Inc, an American multinational e-commerce corporation based in California, announced that it has agreed to sell its Classifieds ads business to Norway’s Adevinta for a total consideration value of $9.2 billion.

As part of the deal, eBay will receive $2.5 billion in cash and around 540 million Adevinta shares which would represent an equity stake of approximately 44% based on the number of Adevinta’s outstanding shares, as of the end of the second quarter, and a 33.3% voting stake, the company said.

The combined group will have solid market positions across 20 countries, with Europe its biggest market, covering 1 billion people with 3 billion monthly visits. The deal is anticipated to close by Q1 next year, targeting $150-$185 million in annual savings on EBITDA within three years.

Executive’s comments

“With the acquisition of eBay Classifieds Group, Adevinta becomes the largest online classifieds company globally, with a unique portfolio of leading marketplace brands. We believe the combination of the two companies, with their complementary businesses, creates one of the most exciting and compelling equity stories in the online classifieds sector,” said Rolv Erik Ryssdal, CEO of Adevinta.

“This deal is a testament to the growth and potential of the eBay Classifieds business,” Alessandro Coppo, SVP and GM, eBay Classifieds Group said in a press release. “We are excited for our local classifieds brands to join Adevinta and shape a global leader in an industry full of potential.”

eBay stock forecast

Twenty-four analysts forecast the average price in 12 months at $56.38 with a high forecast of $77.00 and a low forecast of $44.00. The average price target represents a -3.57% decrease from the last price of $58.47. From those 24, ten analysts rated ‘Buy’, 13 rated ‘Hold’ and one rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $62 with a high of $70 under a bull scenario and $49 under the worst-case scenario. Evercore ISI raised target price to $49 from $41; Jefferies raised target price to $58 from $52; UBS raised target price to $54 from $41 and Stifel raised it to $66 from $52.

Other equity analysts also recently updated their stock outlook. eBay had its price target boosted by analysts at SunTrust Banks from $50 to $54. The firm presently has a “hold” rating on the e-commerce company’s stock. Deutsche Bank raised eBay rating to a “buy” and upped their target price for the company to $57 from $42.

We second Morgan Stanley and Deutsche Bank on eBay stock outlook. We also think it is good to buy at the current level and target at least $65 as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“eBay has shifted its strategy to lower growth and cost rationalization and is aggressively repurchasing shares. New growth drivers, such as Promoted Listings and Payment intermediation (to be rolled out in full mid-2020) are on track,” said Brian Nowak equity analyst at Morgan Stanley.

Stock Market: The Earnings of Microsoft, Amazon And More

Ford Motor

EPS forecast: $0.26

Revenue forecast: $36.73B

Ford has been going through a hard time during the past few years as the demand for its cars, particularly sedans, fell. Now one of America’s largest automakers is undertaking an $11 billion restructuring plan which implies layoffs, closing factories overseas, and building capacity to manufacture electric and driverless cars. As a result, investors will want to see what progress the company made in these areas.

The stock has been within the general downtrend since 2014. In the first half of 2019, the price tried to recover but met resistance around $10.50, formed a double top and turned lower. In October, Ford managed to show a bullish correction recovering from $8.45 to the 200-day MA at $9.30. Last week the stock closed above the 50-week MA ($9.214). All in all, if the financial results are decent enough, there’s technical potential for an extension to $9.64 (September high) and $10.00 (resistance line, 200-week MA). This area, in turn, will be a great obstacle for buyers. Support lies at $8.70 and $8.45.

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Microsoft

EPS forecast: $1.24

Revenue forecast: $32.14B

According to analysts’ forecasts, Microsoft’s earnings will rise by 9%, while revenue will increase by 10.5% y/y. Noticed that during previous quarters, the company tended to beat expectations. Microsoft has a variety of products that generate solid income. Pay special attention to the dynamics of Azure, its cloud computing service – the figures should once again be pretty impressive as the tech giant added new capabilities to its product.

The stock has been trading sideways between $142 and $131 since the end of June. The price consolidated after a long-term uptrend. Currently, it’s in the $137 area, near the middle of the horizontal range. Its edges, mentioned earlier, are the initial targets.

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Tesla

EPS forecast: $-0.45

Revenue forecast: $6.47B

Tesla is expected to show the third unprofitable quarter in a row despite selling a record number of cars. At this point, bad figures will be a surprise to no one, so investors, on the contrary, will look for glimpses of light: a forecast for future profit, a positive free cash flow, evidence that demand remains solid. If the electric vehicle maker doesn’t provide these sources of hope, the negative pressure on the stock will mount.

After the selloff in the first half of the year, Tesla bottomed in June and then managed to stabilize. Most recently, the price met the resistance of the July high ($266). On the upside, there are also obstacles at $268 and $273.6 (50- and 200-period MAs) ahead of $278 (50% Fibo retracement of the 2018-2019 decline). Support lies at $235 and $231 (daily MAs) as well as $225 (support line).

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eBay

EPS forecast: $0.64

Revenue forecast: $2.65B

Analysts have positive expectations about eBay’s financial results. The company’s putting a lot of effort into the technological enhancement of its core e-commerce business. On the downside, the increased investment may hurt earnings. In addition, notice that the competition with Amazon and Wal-Mart is a big challenge for eBay. Investors will also look for the news regarding the potential sale of StubHub or eBay Classifieds, a contentious issue for the company that provoked the departure of its CEO last month.

The stock has been on the rise since the end of 2018. However, at the end of September, the price slipped below $39 – this level tends to be an important border for eBay during the whole year. A return above $39.50 (100- and 50-day MAs) is needed to open the way up to $41 and 42.50 (78.6% Fibo retracement of the 2018 decline). Support is at 37.65 (200-day MA), $36.50 and $35.50.

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Thursday, October 24

Amazon.com

EPS forecast: $4.59

Revenue forecast: $68.82B

According to Wall Street, Amazon’s adjusted earnings will decline by about 20% y/y showing the first decline in nine quarters. The company’s revenue, however, is seen increasing by 22%. During the last few months, Amazon was pressured by lower-than-expected earnings, volatile equity markets, political criticism, and antitrust allegations. In this report, investors will look at the numbers for Amazon Web Services (the company’s cloud segment), the signs that the Prime delivery speed increase is boosting sales growth in North America as well as Amazon’s guidance for the next quarter.

Although Amazon remains one of the best long-term performers among both tech and consumer goods stocks, it is behind other the other so-called FAANG stocks during the past year. In August, the stock violated the uptrend from the end of 2018. The price then started trading below $1,835/50, limited by the 100- and the 50-day MAs. The most recent attempt of the price to get higher ran into an obstacle just below $1,800, near the 200-day MA. All the mentioned levels will act as resistance. Below $1,740 support is at $1,700 and $1,670 (June low).

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Intel

EPS forecast: $1.23

Revenue forecast: $18.02B

During the previous quarter, Intel benefited from rising demand for personal computers and sales of higher-priced server chips. Investors will want to see whether the positive trend continues and what the semiconductor producer projects for the rest of the year. So far, the stock has been resilient enough despite the trade war between the United States and China, an important market for the chipmaker, although the threat of higher tariffs has obviously limited its upside.

The stock of Intel is trading within an ascending triangle. The resistance that has been keeping the price from getting higher lies at $53.20 (61.8% Fibo retracement of the April-May decline). The break above this obstacle will open the way up to $55 and $56 (78.6% Fibo). Support lies at $50 (200-day MA, support line) and $49.20/00. The loss of 48.50 will make the price vulnerable for a decline to $46.75.

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Visa

EPS forecast: $1.43

Revenue forecast: $6.08B

For years, Visa’s stock has been slowly but surely appreciating – a reflection of the fact that digital payment is replacing cash. This tendency has all the chances to continue pushing the price higher, although there may be corrections on the way. This time, Wall Street sees Visa earnings rising by 18% y/y and revenue grows at 12%. Notice that Visa has a tendency to beat forecasts during the earnings releases.

Visa’s long-term uptrend ran in September into the resistance at $187.00. Since then, the price has consolidated around $175.00. The further resistance is at $190 and $200. On the downside, support lies at $169.00 and $163.80 (200-day MA). The fall below $160 will question the uptrend.

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