Story updated at 9:55 a.m. to reflect market activity.
Shares of eBay fell -1.3% to $50.84 in morning trading.
The online retailer is seeing weak near-term trends, and there is downside to estimates according to Pacific Crest analyst Chad Bartley.
"We acknowledge EBAY's P/E multiple is reasonable on current estimates, although shares trade at a PEG ratio of 1.25x, investor expectations are low and the challenges eBay is facing are well understood," Bartley wrote. "However, our recent checks with sellers and our Consumer Tech survey have raised concerns about growth trends in Q2 and 2H14. We expect modest growth to continue in 2014 and believe competition and investments could add to pressure on margin and earnings growth. We also see risk for a series of estimate reductions similar to 2013 and believe 2014 results could finish closer to the low end of guidance. We had previously thought estimates had been reset to reasonable levels and would eventually begin to improve."
Separately, TheStreet Ratings team rates EBAY INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate EBAY INC (EBAY) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 21.2%. Since the same quarter one year prior, revenues rose by 13.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Although EBAY's debt-to-equity ratio of 0.21 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.34, which illustrates the ability to avoid short-term cash problems.
- EBAY INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EBAY INC increased its bottom line by earning $2.18 versus $1.99 in the prior year. This year, the market expects an improvement in earnings ($2.98 versus $2.18).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 443.6% when compared to the same quarter one year ago, falling from $677.00 million to -$2,326.00 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, EBAY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: EBAY Ratings Report