Morningstar

Solid Start, Back-Half Tailwinds Support View on Ebay

We expect to increase our fair value estimate of the firm, but prefer a wider margin of safety before adding to positions.

Securities In This Article
eBay Inc
(EBAY)

With the solid start to the year and the back-half tailwinds, we're buying more into eBay's 2017 outlook. We've plan to adjust our model to the high end of its organic revenue growth guidance of 6%-8% (implying $9.3 billion-$9.5 billion), just above the midpoint of its operating margin (29%-31%) and adjusted EPS forecasts ($1.98-$2.03) due to technology investments, brand marketing, and promotional activity. Over the next five years, we assume average annual revenue growth of 4% and operating margins of 32%, though site enhancements coupled with traditional retailers looking for greater online distribution and new international opportunities (including the Flipkart partnership in India) could set the stage for upside.

Based on greater near-term optimism and tax reform adjustments, we're planning to add a few dollars to our $30 fair value estimate. While we find eBay to be an attractive capital-allocation story, we'd prefer a wider margin of safety before adding to positions.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

More in Stocks

Our Top Pick for Investing in US Renewable Energy

Utility-scale solar and battery storage installations are poised to set records in 2024.
Brett Castelli

How to Measure a Stock’s Uncertainty

Morningstar’s Uncertainty Rating helps investors understand the risks associated with an investment and how that may influence a decision to buy.
Emelia Fredlick

How to Determine Whether a Stock Is Cheap, Expensive, or Fairly Valued

The Morningstar Rating for stocks gauges how a stock’s price compares with what our analysts think it’s worth.
Emelia Fredlick

About the Author

R.J. Hottovy

Sector Strategist
More from Author

R.J. Hottovy, CFA, is a consumer strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is responsible for consumer discretionary and staples research. He has covered the consumer sector as an analyst and director of global consumer equity research for Morningstar since joining the company in 2008, and specializes in a broad range of consumer categories including restaurants, footwear and apparel retailers, consumer electronics retailers, fitness clubs, home improvement and furnishing retailers, and consumer product manufacturers.

Before joining Morningstar, Hottovy was a director and senior stock analyst for Next Generation Equity and an analyst for William Blair & Co., specializing in a wide range of retail and consumer product companies. He also spent two years at Deutsche Bank, covering waste management, water utilities, and equipment rental stocks.

Hottovy holds a bachelor’s degree in finance and a second degree in computer applications from the University of Notre Dame, where he graduated magna cum laude. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Institute and the CFA Society of Chicago.

Sponsor Center