Bernstein lifts eBay rating to "Outperform," citing an "improved growth profile"

Investing.com - Shares in eBay (NASDAQ:EBAY) edged higher on Monday after analysts at Bernstein upgraded their rating of the e-commerce group to "Outperform" from "Market-Perform."

Last week, eBay unveiled a fourth-quarter forecast that missed Wall Street expectations, in a possible sign that customers were ratcheting down spending on its collector's items and refurbished goods during a time of lingering cost-of-living pressures.

The outlook around the US economy remains somewhat uncertain despite indications that it has stayed resilient. Consumers have been cautiously spending as a result, with analysts cited by Reuters flagging particular demand issues for higher-priced discretionary items.

After the announcement, in which eBay set its current-quarter revenue guidance range at between $2.53 billion to $2.59 billion, the firm's stock price slumped. The forecast was below average estimates of $2.65 billion, according to LSEG figures cited by Reuters.

Speaking to analysts, CFO Steve Priest said the guidance "contemplates a challenging operating environment due to persistent economic headwinds" and one-off headwinds from the US election, a shorter holiday shopping period, and Hurricane Milton in October.

However, in a note to clients, the Bernstein analysts led by Nikhil Devnani said the pullback in the stock price offered "a better entry point" for investors.

Although they noted market concerns over heavy competition facing eBay, the analysts said the company's renewed focus on delivering items that "best appeal to its core audience" are helping fuel a return to "modest" gross merchandise value (GMV) growth.

Gross merchandise value, a measure of the total value of goods sold on a platform over a specific period of time, is a key measure used to indicate the strength of demand. In eBay's third-quarter, the metric rose by 2% on an as-reported basis to $18.3 billion.

"We have been increasingly encouraged by the company’s progression on GMV growth, and believe eBay can sustain [low single-digit] (roughly 2%) growth into 2025 — and hopefully continued acceleration thereafter," the analysts said.
"While growth rates at eBay aren’t heroic, we believe proving to the Street that it is a ‘steady grower’ and not a ‘melting ice cube’ offers room for upside the stock."

(Reuters contributed reporting.)