Carl Icahn's spinoff proposal is overshadowing weak fundamentals, says Needham's Kerry Rice, reiterating a Hold on the stock. "We believe a spinoff of the PayPal business is unlikely." The team lowers its FY2014 EPS esimate to $2.97 from $3.05 and sets 2015 at $3.45.
Susquehanna's Brian Nowak also believes a spinoff is unlikely and removes his Buy rating on the stock. "We believe it more likely that eBay stays one company and steps up its investment spending, which limits its potential for higher earnings power."
"While shareholder activism could keep a floor on the share price near-term, we see few compelling reasons to buy the stock at current valuation levels," says Topeka's Victor Anthony, also removing his Buy rating. His team cuts is FY2014 EPS estimate to $3 from $3.15. "Challenges growing the core above e-commerce, challenges monetizing off-line initiatives, and stepped-up investments at Payments, are likely to limit management's ability to post beat and raise results over the next year."
Stifel Nicolaus also downgrades to Hold.
Previous coverage of earnings/Icahn
EBAY now up just 1.7% after being up nearly 10% last night.
From eBay founder and chairman Pierre Omidyar: "I and the rest of (the) board are fully aligned that eBay and PayPal are best together."