Ebay Lifts Quarterly Sales and Profit Forecast; Shares Jump To All-Time High

support@smarteranalyst.com (Ben Mahaney)

Shares in eBay Inc. (EBAY) surged to an all-time high after the e-commerce operator raised its second-quarter revenue and profit forecast fueled by booming online sales during the coronavirus pandemic.

The stock rose 8% to $50.10 in midday U.S. trading. Ebay said it expects its second-quarter merchandise volume growth rate to be between 23% and 26% as active buyer growth is accelerating, with about 6 million new and reactivated buyers added in April and May.

The e-commerce platform experienced strong demand across all its businesses, including home & garden, electronics, fashion and collectibles as more people ordered online due to the stay-at-home orders in place to contain the coronavirus pandemic. Moreover, the company disclosed that since March tens of thousands of small business sellers have been added to the platform.

As a result, it now expects second-quarter revenue to be between $2.75 billion and $2.80 billion, up from earlier estimates of $2.38 billion to $2.48 billion. Adjusted profit is forecast to be between $1.02 and $1.06 per share compared with an earlier range of $0.73 to $0.80 per share.

Although eBay did not update full-year guidance, its management currently expects that it will likely be above the ranges announced on April 29.

Shares almost doubled since reaching a low in March and are now trading 35% higher than in the beginning of the year.

In reaction to the forecast update, five-star analyst Youssef Squali at SunTrust Robinson increased his price target to $50 from $40, but maintained a Hold rating on the stock saying that although solid performance highlights benefits to e-commerce from sheltering-in-place due to Covid-19, it's unclear how much of it is due to sustainable improvements to the platform.

“Lack of conviction as to the sustainability of these robust trends post pandemic, and potential headwinds from Amazon regaining its shipping efficiency, offline commerce re-opening, and federal unemployment benefits unwinding keep us on the sidelines,” Squali wrote in a note to investors.

The rest of the Wall Street analyst community is divided between 10 Buy versus 9 Hold and 2 Sell ratings adding up to a Moderate Buy consensus. Following the recent rally, the $43 average price target now forecasts 14% downside potential in the next 12 months. (See EBAY stock analysis on TipRanks).  

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