NEW YORK (TheStreet) -- Shares of eBay (EBAY) are rising, up 1.06% to $55.39 in pre-market trading on Monday, after analysts at Stifel Nicolaus upgraded the online auctioning site to "buy" from "hold" with a $65 price target, calling the company the "real deal" in the e-commerce sector.
The firm said in a note that they, "envision a $2:$1 risk/reward on a base case and $3:$1 on a bull case based on what we believe are a reasonable set of assumptions and comparable." The assumptions refer to the spin-off of its payment service division, PayPal within the next nine months.
The firm believes the spin-off will allow both eBay and PayPal to invest while operating profits grow faster than revenue.
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Analysts added that they think eBay's marketplaces gross margin will see acceleration in the second half of 2015.
Separately, TheStreet Ratings team rates EBAY INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate EBAY INC (EBAY) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in stock price during the past year, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- EBAY's revenue growth trails the industry average of 28.1%. Since the same quarter one year prior, revenues rose by 11.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- EBAY INC's earnings per share improvement from the most recent quarter was slightly positive. 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 ($2.95 versus $2.18).
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Net operating cash flow has slightly increased to $1,368.00 million or 2.54% when compared to the same quarter last year. Despite an increase in cash flow, EBAY INC's cash flow growth rate is still lower than the industry average growth rate of 25.78%.
- The gross profit margin for EBAY INC is currently very high, coming in at 75.14%. Regardless of EBAY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 15.46% trails the industry average.
- You can view the full analysis from the report here: EBAY Ratings Report