Here’s a Wall Street question: When is a “buy” a tepid rating for a stock? Perhaps when it’s Goldman Sachs doing the rating.
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Seeking Alpha reported on Wednesday (Nov. 25) that the venerable Wall Street firm lowered its rating on eBay a notch, taking the company down, with some semantics, to “buy” from “conviction buy.” And at the same time, the price target on the common stock actually was bumped up by 10 percent to $33. The shares barely budged on the day, down slightly to finish the session at $29. Clearly, investors were not exactly spooked by the downgrade, and it should be noted that it is one prompted by valuation rather than clear fundamental warning signs.
Goldman said the 14 percent upside calculated for the company compares relatively unfavorably to other stocks in its buy-rated pantheon, where the average price target is as much as 31 percent. Sometimes, on the Street, you acknowledge the strengths of the story even while you champion the other darlings in the lineup, and that seems to be what is going on here.
Indeed, Goldman said it thinks the tech giant’s “ongoing investments into technology should serve to improve the user experience and conversion rates, while potentially slowing the declines in organic traffic from search results.” Parsing the note, Seeking Alpha said the equity analyst still mentioned the potential for improved focus, a positive fallout from the PayPal split. And, Goldman said, StubHub and eBay Classifieds “are performing well.”
In reference to valuation, the firm has seemed to regain traction in the wake of share losses at the mercy of Google and Amazon. Yet, those triumphs seem to be well-reflected in the multiples tied to the stock price, where forward PE is nearly 15x.