Sold! eBay Surges As It Gains Users
Evelyn M. Rusli, 09.11.07, 1:15 PM ET
When eBay first launched in 1995 only a handful of users visited the site. How things have changed. Since then, eBay has grown into an Internet colassus, with hundreds of millions of users. And it shows no sign of a slowdown, says one JPMorgan analyst.
Shares of eBay (nasdaq: EBAY - news - people ) surged 3.3%, or $1.15, to $36.14 after JPMorgan analyst, Imran Khan, said more people are logging onto the site.
One reason? It's cheaper. On August 22, 2006 eBay initiated a price cut for auctions. This was designed to "rebalance the marketplace environment and improve listings quality," Khan said. "Having passed the anniversary of those changes, we believe eBay is showing a a more positive listings trajectory."
Through August 22 of this year, Khan said eBay's listings fell 6.4%, on a year over year basis. Since August 22, however, Khan said listings rose 6.1%. The uptick was likely boosted by recent promotions, such as eBay's decision to grant U.S. consumers a discount for using premium services, such as the "Gallery option." eBay announced a similar promotion in Germany in September.
The listings data increased Khan's confidence that eBAY would achieve a year-over-year listings growth of 4.5% in 2008. According to Khan, continued improvements for users and a weak dollar should also help eBay gain more money per listing. While increased promotions could hurt margins, users may ultimately take advantage of more auction features, he said.
eBay could also be a good buy because, simply put, it's cheap, trading at a 23.3% discount to its peers. "We believe better than expected revenue growth and improving margins will lead to multiple expansion and relative stock outperformance," Khan said. He reiterated his "overweight" rating on the stock, and set the price target at $34.99.
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