EBay (NASDAQ:EBAY) is America’s well-known name when it comes to an e-commerce company, which provides consumer to consumer as well as business to consumer services online. Over the years, the company has proven to be a success story with in the dot com domain. The company is best known for its online auction and shopping website for people and businesses to buy and sell a wide variety of goods and services globally. There are also other options of “Buy It Now” shopping, online event ticket trading as well as online money transfers via PayPal as well as other few services.
The eBay (NASDAQ:EBAY) status has recently shifted from Hold to Buy at $65 price target. This move has given birth to speculations and evaluations and it is calculated that the firm can expect a $2:$1 risk-to-reward on a bas case where as the ratio of the bull case is expected at $3:$1. Even though investors’ main focus still lies with Amazon (NASDAQ:AMZN), eBay (NASDAQ:EBAY) still is considered a big deal in the US e-commerce sector. It’s expected that the next nine months are very crucial for eBay (NASDAQ:EBAY) as many analysts believe that the company may undergo a corporate spin. The expectations are based on four elements.
– The gross merchandise for the market place will be deeply by Google (NASDAQ:GOOG) for the second half of 2015. Bets are being placed for the company’s search engine, security breech as well as StubHub pricing changes.
– The repositioning of PayPal ever since the launch of Apple (NASDAQ:AAPL) Pay came into play.
– Compelling evaluation for 2016
– An expected corporate spin of eBay (NASDAQ:EBAY)/PayPal, which allows them to invest as operating profits seem to grow faster than revenue for the first few years post spin.
To conclude it seems like eBay (NASDAQ:EBAY) can expect a very happening and satisfying next 12 to 18 months, with very little risk expectation and a base case worth of $65 and the bull case expectation of $75. Now all that is left is for eBay (NASDAQ:EBAY) to flawlessly execute the spin and see how the investors respond to it. If they accept it, then eBay (NASDAQ:EBAY) could expect to reach new heights. The operating agreements are to be finalized mid-2015 and the spin is expected to take place by the end of the summers.
The set price target of $65 is a combination of sum-of-the-parts analysis, as well as the acquisition premium probability. These earnings for 2016 are established before taxes, depreciation and amortization multiples that applies 10 times for eBay (NASDAQ:EBAY), 14 times for PayPal and 9 times for eBay (NASDAQ:EBAY) Enterprise. Further expectation held from eBay (NASDAQ:EBAY) and PayPal is the ability to hold strategic assets. To ensure this, a 20% acquisition premium along with 25% of probability which adds an additional $3 to $62 of the implied price.
These are all predictions and set speculations that analysts as well as investors have for the future. Now it’s up to eBay (NASDAQ:EBAY) to produce the desired work and effort required to attain these goals.