Compared to the larger, higher-profile FANG stocks, eBay Inc (Nasdaq: EBAY) doesn’t get nearly as much love from Wall Street as a long-term internet investment.
However, eBay is Credit Suisse’s top large-cap stock pick, and analyst Paul Bieber says eBay has several catalysts ahead that could help drive impressive earnings and revenue growth in coming years.
[See: 7 of the Best Stocks to Buy for 2018.]
According to Bieber, eBay could add as much as $2 billion in revenue and $500 million in profits via intermediating payments on roughly $8 billion in gross merchandise volume sales on its platform by 2021. Earlier this year, eBay announced it is cutting ties with former subsidiary PayPal Holdings ( PYPL) starting in 2021. PayPal has served as eBay’s primary payments processor, but eBay will soon be taking over this business itself along with new partner Adyen.
PayPal will stay on a payment option for eBay customers until at least 2023, a move which Bieber says which will help smooth the transition and eliminate potential conversion risks.
“If we apply a 15x multiple to the payment business and discount it back to 2018, we estimate that the payment opportunity could be worth $4.50 per share in value,” Bieber says.
In addition to the payments business, Bieber says eBay’s StubHub business and/or classified business could be worth $10 billion in the long term. He says eBay’s focus on structured data and its investments in marketing will also likely pay off big for long-term investors. Finally, Bieber says eBay’s recent acquisition of Giosis’ Japan business helps boost the company’s footprint in Asia and strengthen its cross-border trading capabilities.
“The bottom line is that the eBay acceleration thesis continues to play out, aggressive share repurchases are shrinking the float and the payments opportunity now represents material option value,” Biber says. “eBay is our favorite large-cap idea.”
Morningstar analyst R.J. Hottovy also says eBay’s data-driven merchandising, improved seller tools and other platform improvements are positives for the stock, but eBay is still dealing with the Amazon.com ( AMZN) threat.
[See: 10 Investing Themes to Remember for 2018.]
“Despite platform enhancements and transition into payment intermediation, we still harbor some concerns about eBay’s ability keep occasional users engaged with Amazon continuing to find new ways to bring small and midsize business, or SMB, sellers onto its third-party platform,” Hottovy says.
Credit Suisse has an “outperform” rating and $51 price target for eBay. Morningstar has a “fairly valued” rating and $44 fair value estimate for EBAY stock.
More from U.S. News
12 Terms Every Investor Needs to Know
10 ETFs to Buy for Aggressive Growth
10 Smart-Beta ETFs That Will Help You Get Your Alpha
This is Why eBay Inc Is a Top Large-Cap Stock Pick originally appeared on usnews.com
