EBay (EBAY) - Get Report shares were steady Friday after a Wells Fargo analyst, expecting increased competition in the auction and retail company's core marketplace business, downgraded the stock to underweight from equal weight.
The risk/reward equation for eBay seems off kilter to analyst Brian Fitzgerald as he cut eBay’s price target to $32 a share from $45, a potential 10% downside from the stock’s Thursday closing price.
At last check eBay shares eased 0.2% to $35.87.
Fitzgerald said he was concerned that eBay’s core marketplace business will continue to face headwinds “as competition between Amazon (AMZN) - Get Report and multichannel retailers mounts (driving consumer experience innovations which we believe eBay remains poorly positioned to match).”
"We estimate eBay's U.S. gross merchandise volume through the first three quarters of 2019 was 5.8 times larger than the combined GMV of emerging marketplaces Etsy, RealReal, Mercari and Poshmark, down from 7.6 times larger in 2018," Fitzgerald said.
Another headwind for eBay, and the entire online retail sector, is the rollout of U.S. internet sales taxes, which disproportionately affect the small sellers essential to eBay’s platform.
The stock was pressured in the latter part of 2019 after CEO Devin Wenig stepped down following an activist campaign from Elliott Management. The hedge fund has proposed that the company sell off business units. The company fell further in October, after reporting disappointing third-quarter results.
It also guided investors to fourth-quarter revenue between $2.77 billion and $2.82 billion, short of analysts' expectations of $2.85 billion. Earnings were expected to be 73 cents to 76 cents a share. Analysts are expecting 76 cents, according to a FactSet survey.