Goldman Sachs is out positive on eBay (NASDAQ:EBAY), saying that based on their 28th quarterly study, marketplace trends reinforce their growth outlook and 4Q results should be in-line/above slightly higher revenue and EPS estimates of $2,141 mn and $0.41 vs. $2,125 mn and $0.40 previously.
While achieving or exceeding 4Q estimates will be a net positive and will reinforce firm's growth outlook, the bigger focus and stock driver will be management's decisions related to pricing and EBIT growth given margin comments. After assessing the debates and unknowns, they remain comfortable that eBay's decisions will be within a financial box of at least 15% operating income and EPS growth, while ultimately results could prove to be better. The pricing changes over the long term should increase the value of the platform to both the buyer and seller and could potentially re-ignite growth. Additionally, the potential margin pressure in 2008 due to a mix shift and investments will likely not come at the expense of overall operating income dollars, which should grow in the mid-teens.
GSCO maintains their Buy rating with upside to their $51 price target. They think the stock's current valuation of 16X 2009 EPS and a 7% FCF yield implies ~11% growth, which appears to be based on eBay's marketplace growth as opposed to their 16% growth from 2009-2012, which reflects total company growth.
Notablecalls: EBAY has sold off over the past month, but I think GSCO's comments may generate a tradable bounce in the very near term. Just take a look at that $51 price target! EBAY's a $30 stock here. That's a good risk-reward.