eBay Inc. (NASDAQ:EBAY) continues to attract attention from investors with many looking to tap into the value that would be unlocked with the upcoming spinoff of PayPal. During an interview on CNBC, BGC Financial analyst, Colin Gillis, reiterated that eBay continues to struggle in the online marketplace with its poor show on the other hand offset by a better performing PayPal.
PayPal has remained a success story for eBay Inc. (NASDAQ:EBAY) having increased its user base by 4.6 million which Gillis maintains justifies his valuation estimate of $40 billion. EBay on the hand continues to show signs of weakness having posted a weaker first quarter guidance of between 68 cents and 71 cents against consensus estimates of 76 cents.
“If you are investing in eBay Inc. (NASDAQ:EBAY) you are looking beyond the next few quarters because you want to see the PayPal value unlocked. If it was going to be a great quarter, they wouldn’t be breaking up the company. So the metrics we care about are the PayPal metrics. We know the marketplace is struggling it delivered struggled results, but the PayPal metrics are great they did really well in Mobile,” said Mr. Gillis.
eBay Inc. (NASDAQ:EBAY) has already announced that it is to cut its workforce by 7% amounting to 2,400 positions something that Gillis expects to accord the company more free cash flow. The company has also reached an agreement with Carl Icahn, which the analyst believes will accord PayPal with good governance heading into the IPO. A breakup, in this case, would also position PayPal as a potential acquisition target from would-be suitors.
A breakup of eBay into a possible three parts has thrown into doubt eBay Inc. (NASDAQ:EBAY)’s prospects, in the long run, which CNBC’s Pete Najarian maintains still remain positive.
“[…] The new active users for marketplace; that number was up as well. So they are getting the hits, and it’s all about the metrics and I think Carl Icahn can obviously break that down better than I can. I don’t think that this is a dead business, I don’t think it is a falling business, it has slowed there is no doubt about it. Internationally it is much slower than it is here in the U.S but that is an area I think they could grow out,” said Mr. Najarian.
Steve Grosso, on the other hand, remains skeptical about buying eBay at the current margins as the stock remains purely a PayPal break up play. A drop to $50 a share prior to PayPal spinoff would be a perfect entry point for Grosso in terms of risk reward as the stock has been found to be trading between $50 and $57 a share.
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