(Changes source, adds details, share movement)
Oct 16 (Reuters) - J.P. Morgan Securities downgraded eBay Inc (EBAY.O) while at least 7 other brokerages cut their price targets on the stock Thursday, a day after the online auction leader gave a disappointing fourth-quarter outlook.
Shares of the company fell as much as 11 percent to 13.69, their lowest in more than five years, but pared some losses and were down $1.20 at $14.12 in midday trade on Nasdaq.
“We believe eBay’s biggest challenge is an inferior technology platform, which is making it difficult for the company to compete with other eCommerce platforms, such as Amazon’s (AMZN.O),” J.P. Morgan analyst Imran Khan said.
Khan downgraded the stock to “neutral” from “overweight.”
The company’s future growth will be inhibited, even after the economy recovers, if it fails to improve user experience, he wrote in a note to clients.
The brokerage cut its earnings estimates for eBay for the second time in a week said it expects the company’s GAAP earnings will be up only 3 percent next year.
“We expect margins to contract, resulting in anemic operating income growth,” Khan said.
STRUGGLE TO CONTINUE
Sanford C. Bernstein analyst Jeffrey Lindsay, who cut his price target on the stock to $22 from $31, said the steady gains in metrics such as number of active users were being offset by declining sales rates and falling gross merchandise volume.
Analysts at Stifel Nicolaus, RBC and Jefferies & Co also voiced their concerns on the same, saying decline in gross merchandise volume demonstrated continued struggle.
The company’s gross merchandise volume (GMV) for the third quarter decreased by 1 percent to $14.28 billion.
“...The GMV weakness that appeared in the third quarter at eBay and projected by management to reoccur in the fourth quarter will continue into 2009,” brokerage Soleil said. It cut its price target on the stock to $16 from $25.
EBay’s fourth quarter is usually its strongest due to the holiday sales but on Wednesday the company forecast adjusted fourth-quarter earnings well below Wall Street estimates. [ID:nN13459713]
Sanford analyst Lindsay said he expects a recessionary environment to persist through much of 2009, both at home and abroad, and anticipates eBay’s 2009 revenue growth of only 3 percent and earnings of $1.72 per share.
The analyst, however, said he remains positive on the prospects of the company and the stock, and maintained his “outperform” rating.
The following is the list of price target changes:
Brokerage Price Target
Sanford C. Bernstein $22 $31
Jefferies & Co $22 $32
RBC Capital Markets $21 $25
Barclays Capital $15 $22
UBS $17 $18
Soleil $16 $25
Stifel Nicolaus $20 $22 (Reporting by Aftab Ahmed in Bangalore; Editing by Gopakumar Warrier)