Is eBay's Core Business Turning Around?

Collins Stewart analyst Sandeep Aggarwal Wednesday morning upped his rating on eBay (EBAY) to Buy from Hold, with a price target of $23. His thesis is that the company is showing signs of a turnaround in its core Marketplace business.

“Though eBay still has a long way to go, the signs we have seen so far are extremely encouraging,” he writes. His case:

• The company has improved its search for the best match favoring merchants with higher seller ratings.
• It is “dramatically increasing” penetration for free shipping by offering incentives.
• Standing behind buyers using PayPal in case of fraud/legitimate returns.
• Increasing selection by implementing fee structure changes.

He contends these changes translate to higher listing conversions, growth in gross merchandise value higher than listings growth, higher realized dollar value per listing and more satisfied buyers and sellers.

Aggarwal upped his 2009 EPS estimate by a penny to $1.47. For 2010, he now sees $1.71, up from $1.62.

The Street appears unconvinced: EBAY Wednesday is down 24 cents, or 1.3%, to $17.72.

Original post

Comments

[User 283977:]

The words "His thesis" says it all. No data was supplied. Its all talk.

I use Ebay, and I have not seen any positive changes. My GUESS is that the number of buyers AND the average purchase amount are going to decrease in 2010 and this will lead to a net reduction in EPS.

The difference between me and Aggarwal is that I labelled my conclusion as a GUESS as opposed to "Analysis". He divines a one penny EPS increase for 2009 followed by a 16.3 percent EPS increase by the end of 2010, all based on pulling numbers out of the air (I was nice in ascribing the source for his numbers).

There are a lot of posts on Seeking Alpha with respect to the quality of Ebay's management, each of which represents not just dissatisfied customers, but really angry former customers. That's data, and until I see a major change in management at Ebay, I think the stock is better positioned as a short.

Jun 03 05:56 PM

[jay dee:]

Sandeep just in name sounds like a typical ebay Director - I see those smiling faces everytime they roll out another insulting "change for the better" edict.
Does Sandeep sell on ebay and jump through all their hoops ?!

Dramatically increasing penetration by offering WHAT incentives for free shipping ?? Telling sellers to "build" the cost into the price - how do you do that ? Raise the price or does ebay subsidize - yeah right - the only increased penetration Sandeep baby is up the sellers butts !
Where does Sandeep get his information on how happy the buyers and sellers are ? from his other job at the ebay call centre ?

I recently got bored and curious after a 9 month lay off from Ebay fun !
Figured I'd spend 10 bucks and test the North Atlantic waters. Ran a bunch of fixed price ads for the new and improved 30 listing day period at the 35 cent bargain listing fee rate which is 4 to 7 X my usual listing cost. WHAT A WASTE OF TIME !!
I got the fun of wasting my time checking for bids and offers for 4 weeks instead of the usual one week.
So what happened : as usual every one waits to the last day with their insulting low ball offers.
Not one iota of difference as to the number or value of sales !

Hell I won't do that again - I will wait for the usual monthly 5 or 10 cent listing day throw my ads in and only waste 7 days having ebay fun !.
You see this is how ebay pools the wool over (anal-ists eyes ) tells you and the sellers "see how we're improving the seller experience": as they jack up listing and commission fees but say look : "we're giving you longer listing periods" which doesn't cost them anything and doesn't do a damn thing as far as sales go.

Jun 03 09:44 PM

[Philip Cohen:]

"Turning around?"

You must be joking; where is the evidence? Crystal ball? eBay spin doctor? I would put my money on there being yet another reduction in revenue in Q209.

All these so-called "special" deals for sellers are simply the last desperate gasps of a man going down for the last time: too little, too late, all those "noisy" steerage class passengers, that made eBay what it used to be, have left the ship some time ago.

The real question is, can this disingenuous "turkey", Donahoe, survive yet another Xmas?

Jun 04 05:55 PM

[Henrietta:]

There is no such thing as 'free shipping' the Post Office charges an annually increasing amount to ship and sellers pay it, passing on the cost to their buyers.

"Increasing selection by implementing fee structure changes" is BaySpeak for our Diamond Sellers pay no insertion fees so they list lots of cheap imported and refurbished rubbish.

There is very little selection anymore in the categories that grew eBay and differentiated it from all the other sales venues. Sellers of collectibles have been fee differentiated to the tune of 12% in final value fees which are also paid on the value of shipping when free shipping is mandated. As they DO pay insertion fees the resulting price increases price their items right out of the market.

Shoppers with more than two functioning brain cells search for the items they want on Google, not eBay.

I am so tired of lazy analysts who swallow the corporate line, bait, hook and sinker. The only one worth reading is Jeetil Patel.

As a previous commenter said, there are a lot of really angry former customers out there, there are even more who are past anger and merely contemptuous. Some of us were shareholders. Think of the three eleven rule and get real.

Jun 04 06:30 PM

[Henrietta:]

Having read this and totally rubbished it I read this tinyurl.com/qu95nf at AuctionBytes.

I stand by the majority of my comment, however my comments on Sandeep Aggarwal were based on the inadequacies of this article, not the facts as written by Ina Steiner.

Crow for dinner.

Jun 05 01:38 AM