AmTech analyst Tim Boyd reiterated his Sell rating and $20 price target on Ebay (EBAY), dismissing Ebay’s stronger listings growth this month as the result of easy comps. Boy listed his key points as follows:
- 3Q08 core listings are tracking up 35% Y/Y, an acceleration vs. 18% in 2Q08.
- 3Q08 SIF listings are tracking up 16% Y/Y, a deceleration vs. 26% in 2Q08.
- We extrapolate total 3Q08 listings of 736MM, up 32% Y/Y, an acceleration vs. 19% in 2Q08.
- We believe the strong listings growth acceleration QTD is primarily the result of easy comps in the U.S. and Germany (listings counts in both geographies were down materially Y/Y in 3Q07) and significant promotional activity. We also note that 19% listings growth in 2Q08 only translated into 8% GMV growth. We do not get the sense that conversion rates have improved from levels seen in 2Q08, and we believe the shift toward lower-ASP units continues.
- Asia/Pacific listings are up 27% Y/Y; Europe is up 50%; North America is up 23%. Given the fact that eBay ‘ s non-U.S. geographies are growing faster — and in light of a stronger USD QTD vs. 2Q08 — we are incrementally cautious vis-à-vis eBay ‘ s ability to generate substantial upside to Street estimates. This caution is, of course, at least partially offset by the fact that listings growth has accelerated so materially QTD.
- Given the substantial changes that eBay has been making to its fee structure, listings growth could be less highly correlated with transaction revenue growth for at least a few quarters. Nevertheless, listings counts will continue to serve as a valuable indicator of buyer/seller activity on the sites.
- We continue to believe that 1) acceleration in GMV growth and 2) acceleration in Active User growth are prerequisites for EBAY shares to work on the long side.
In Boyd’s view, the fundamental issues that make Ebay a Sell haven’t changed. The weakened balance sheet of the U.S. consumer will continue to undermine consumer spending, and, thus, Ebay transaction fees. Also, Ebay is hemorrhaging share to Amazon and will continue to do so as it tinkers with the “form, function and functionality of its core marketplace.”