Monday, April 14, 2008

eBay (NASDAQ:EBAY): believe eBay is beginning to turn the corner - Piper Jaffray

Piper Jaffray is increasing their estimates for eBay (NASDAQ:EBAY) primarily due to better performance of the core eBay Marketplace in Q1. They arealso increasing estimates for PayPal and Skype.

For Q1, they move from$2,058M and $0.40 to $2,164M and $0.42. Firm note consensus is $2,064M and $0.39 and guidance is $2-2.05M and $0.37-0.39. For 2008, they move from $8.6B and $1.67 P EPS to $9.1B and $1.75. For 2009, they move from $9.6B and $1.88 to $10.5B and $2.00.

They believe solid Q1 upside, increased guidance, and improving metrics (listings and GMV acceleration) should serve as catalyst for shares. While 2008 is still a transition year for eBay as it undertakes a number of initiatives to reaccelerate core eBay growth, they believe eBay is beginning to turn the corner and they believe shares offer an attractive entry point at 18x/16x
2008/2009 PF EPS vs. 15-20% est LT EPS growth.

Piper is also increasing their PT from $34 (18x '09 PF EPS) to $40 (20x '09 PF EPS) due to higher estimates and a slightly higher multiple due to the improved fundamental outlook.

Notablecalls: This is a pretty meaningful call by PJ's Aaron Kessler on many counts.

- First, they are upping their Market Place ests which is somewhat of a surprise (stronger listing + FX)

- Secondly, Payments rev estimates are upped by quite a bit. This is mostly due to increased Market Place revs.

- Third, Skype ests are upped nice. I continue to view Skype as an interesting call option as there have been rumors of Google being interested in buying Skype. Chatter indicates Google is willing to pay up to $6B for Skype, which is twice as much as eBay paid for the co just 2 yrs ago.

eBay has found zilch ways to integrate Skype into their biz model and selling the darn thing for a $3b profit would be awesome.

- Lastly, PJ is upping their tgt to $40 saying they believe eBay is beginning to turn the corner. Bold statement.

Anyway, I think eBay is a buy here given the upside potential & possible catalysts.


Anonymous said...
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Mr Wolf said...

Lovely call. Gapping down indexes provided a nice entry and a favorable risk/reward. Cheers.