Morgan Stanley Says Bullish Call on eBay Stock Was 'Wrong'


Morgan Stanley says it made a big mistake. The top-tier Wall Street bank is admitting it was wrong with a bullish call on eBay stock earlier this year.

Analyst Brian Nowak lowered his rating to Equal-weight from Overweight for eBay (ticker: EBAY) stock, predicting weak growth for sales at the company’s main U.S. business, the eBay-branded website. The analyst also reduced his eBay price target to $33 from $55.

“We were wrong about core marketplaces’ growth and durability and our work shows US marketplaces’ growth is likely to hold back the [valuation] multiple investors pay for eBay,” he wrote on Wednesday.


EBay stock was up slightly to $29.08 in early trading. Its shares are down more than 20% this year and have fallen about 30% since Morgan Stanley upgraded the company in mid-April.

The analyst said growth at the core business missed his estimates in all three quarters since his upgrade. Growth in the company’s U.S. gross merchandise value (a measure of sales on its platform) went from 7.2% in the first quarter to 2.6% in the third quarter.

“We under-estimated how quickly core marketplaces would deteriorate,” he wrote. “We see this deceleration (and the US business likely going ex growth) weighing on the multiple investors are willing to pay and limiting earnings upside as we also see near-term (2019) negative revisions.”

Nowak predicts growth in eBay’s U.S. gross merchandise value will be a meager 2% next year. He noted the company’s stock price is highly correlated to that rate.

That could be a a bad sign for the price in 2019.

Write to Tae Kim at tae.kim@barrons.com


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.









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