EBay (EBAY) - Get Report is demonstrating continued strength even as brick-and-mortar retailers are reopening and coronavirus pandemic restrictions begin to ease, Wells Fargo analyst Brian Fitzgerald wrote Tuesday. Fitzgerald upgraded the online retailer to equal weight from underweight.
Shares of the San Jose, California-based company were climbing 1.2% to $49.32 on Tuesday.
Fitzgerald, who also raised his price target to $50 a share from $32, said in a note to investors that his review of omni-channel retailer commentary and eBay's upward second guidance revision indicate "continued strength in digital commerce from March into April and May, despite brick-and-mortar retailers beginning to reopen across much of the country."
Last week, eBay raised its second-quarter-earnings guidance, saying in a statement that it is “performing significantly better than expectations shared in its earnings release on April 29.”
The company said it now expects second-quarter revenue to range from $2.75 billion to $2.8 billion, compared with the April estimate of $2.38 billion to $2.48 billion.
"While it is too early to tell whether e-commerce penetration will permanently 'ratchet' higher, strong digital demand appears likely to persist over at least the near to mid-term," Fitzgerald said.
Earlier this year, eBay said it was conducting a strategic review of its classified-ads business, which investors have been pushing the company to sell, along with ticket broker StubHub. In December, eBay announced a deal to sell StubHub to Viagogo for $4 billion.
The analyst said he remained cautious on eBay's longer-term growth prospects and believed the market might be overestimating the value creation opportunity associated with the current Classifieds strategic review.
However, he said, "we nonetheless expect EBAY to capitalize on near-term e-commerce headwinds related to COVID-19, which we expect to accelerate e-commerce penetration over the course of the pandemic."