Will Settlement of Icahn Rift Help eBay (EBAY) Stock Today?

NEW YORK (TheStreet) --  eBay (EBAY) shares are down 1.2% to $55.33 in premarket trading Thursday.

Activist investor Carl Icahn is backing off of demands that eBay spinoff its Paypal online payment business and he's dropping his nomination of two hand picked members to eBay's board.

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In return, eBay will appoint David Dorman -- a former AT&T  (T) executive -- as an independent director at Icahn's behest.

"I am optimistic that this arrangement with eBay will enhance our ability to discuss large issues affecting the company with greater intelligence and will help to enhance shareholder value," Icahn said today.

The compromise comes ahead of eBay's annual shareholders meeting next month.

TheStreet Ratings team rates EBAY INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate EBAY INC (EBAY) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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, reasonable valuation levels, growth in earnings per share and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • EBAY INC has improved earnings per share by 14.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. 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).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 16.1%. Since the same quarter one year prior, revenues rose by 13.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Although EBAY's debt-to-equity ratio of 0.17 is very low, it is currently higher than that of the industry average. To add to this, EBAY has a quick ratio of 1.74, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has increased to $1,713.00 million or 23.68% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.60%.
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