EBay: Better-Than-Expected Results Lead to Modest Fair Value Increase
While eBay presents investors with a compelling capital allocation story, shares are fairly valued.
In our view, there were two clear highlights coming out of
The second takeaway was ongoing strength of StubHub and eBay classifieds that saw year-over-year currency-neutral revenue increase 40% and 15%, respectively, owing to a combination of new seller tools and other listing innovations and a strong slate of events and new verticals. We believe StubHub in particular and eBay classifieds to some extent have both carved out differentiated networks of sellers and buyers within the broader e-commerce industry, which continue to give us comfort with our narrow moat rating. That said, we expect StubHub growth to slow in the back half of the year as it laps last year's pricing changes.
We plan to raise our $25 fair value estimate by a few dollars based on the better-than-expected results from Marketplaces and StubHub, and we view raised 2016 guidance--revenue of $8.85 billion-$8.95 billion, adjusted operating margins of 31%-33%, and adjusted EPS of 1.85-$1.90--as realistic. While eBay presents investors with a compelling capital allocation story--especially with a new $2.5 billion share repurchase authorization--we view shares as fairly valued and find more compelling value in wide-moat Amazon.
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The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.