Don’t Count on the PayPal Spinoff to Boost eBay

Advertisement

After a rough year for eBay (EBAY), things are finally looking up for the online marketplace.

eBay ebay stock paypalShares of EBAY are rallying after the company announced that it is spinning off PayPal as a publicly traded company in the second half of 2015. Is this enough to help eBay recover from this string of setbacks?

Company Profile

Consumer-to-Consumer online auction website eBay has been a fixture on the internet since 1995, making it one of the few success stories of the dot.com bubble.

With 145 million active users, over $16 billion in annual sales and operations in 30 countries, eBay.com has developed a reputation for having the best selection and best prices among all shopping websites. In addition to its namesake website, eBay also owns online payment system PayPal (but not for long) and GSI Commerce, a smaller e-commerce company.

Earnings Outlook

Wall Street clearly considers the PayPal spinoff to be a major plus for eBay: Shares are up nearly 7% since the news broke. EBAY stock’s upcoming earnings announcement (on October 15) is also drumming up investor interest.

For the current quarter, the analyst community is calling for 12.3% annual sales growth and 4.7% earnings growth. The bottom-line estimate is significantly below the 33% earnings-per-share growth forecast for the specialty retail industry as a whole. This under-performance is expected to persist next quarter (12.3% vs. 54.4%), this year (9.6% vs. 10.4%) and next year (13.8% vs. 21.9%).

So, even with the PayPall spinoff, I just don’t expect eBay to have a meaningful rebound any time soon.

Current Ratings

The past 12 months have not been kind to eBay: This Conservative-ranked stock has floundered in “sell” territory due to a combination of anemic institutional buying pressure (a measure of a stock’s potential upside/downside) and mixed fundamentals.

EBay earns a “D” for its Quantitative Grade and a “D” for its Fundamental Grade. EBay is really struggling in terms of operating margin growth, earnings growth and earnings momentum, which all fail with “Fs.” Of the eight fundamental metrics I graded it on, EBAY stock could only pull off a “B” for sales growth.

As of this posting, Sept. 30, I consider EBAY stock a “D-rated sell.” I may possibly upgrade EBAY stock over the weekend (when the latest data is pulled into Portfolio Grader), but there’s too much uncertainty to recommend EBAY stock for new money now.

More From InvestorPlace 

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/dont-count-paypal-spinoff-boost-ebay/.

©2024 InvestorPlace Media, LLC