One Upgrade, Two Downgrades: And What Hedge Funds Think About Them

Following the spin-off of Paypal Holdings Inc (NASDAQ:PYPL) into a separate entity, analysts started questioning eBay Inc (NASDAQ:EBAY)’s growth potential. Cantor Fitzgerald’s Youssef Squali downgraded the stock to “Hold” from “Buy”, citing concerns over the company’s slow growth. His price target on the company was also reduced to $27 from $72, while earnings per share estimates for eBay’s third and fourth quarter of 2015 were revised to $0.39 and $0.47, respectively. Search engine optimization undertaken by Google in May 2014 and a security breach are still having a negative impact on the growth of Gross Merchandise Value (GMV), with eBay predicting a 3% to 5% growth rate for 2015 and a flat 5% rate for next year. “We opt to move to the sidelines as we await signs of sustainable growth re-acceleration. While strong FCF generation and $3B in authorized share buybacks limit the stock’s downside risk, we find near-term catalysts lacking and the stock fairly valued,” Squali wrote in a note to clients.

eBay Inc (NASDAQ:EBAY) is up by roughly 9% so far this year and remains one of the most popular stocks among the hedge funds in our database, with more than 13% of them reporting long positions in the online retailer at the end of the second quarter. Carl Icahn is holding on to his stake in eBay, the biggest among the hedge funds we track at 46.2 million shares. William B. Gray, the manager of Orbis Investment Management, was busy buying eBay Inc (NASDAQ:EBAY) throughout the second quarter, boosting his stake by 32% to 16.2 million shares.

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