Upgrades Keep eBay Afloat In A Sea of Red

By the time the bell rang to end Friday’s session, many on Wall Street were heading into the weekend with a growing sense of concern at the surge in COVID-19 cases and a faltering recovery in equities. It wasn’t all doom and gloom though, with investors of original online marketplace eBay (NASDAQ: EBAY) taking solace in their stock being one of the top performers in a sea of red.

With the benchmark S&P 500 index down more than 2% from Thursday’s close and 7% from this month’s highs, while canaries in the coal mine started to drop left, right and center, there were plenty of positives to be taken from eBay finishing the session up 3% on the day and close to 100% from the lows of March.

It’s been a fairly smooth ride back up from the dark days of Q1, when eBay shares traded down at 2015 levels as investors fled equities without a second thought. However, despite an initial 30% dip, investors quickly recognized the sudden opportunity for e-commerce and online businesses to thrive in the face of widespread shutdowns and shelter-in-place orders. By the end of May, shares had already surpassed their previous all-time high close and have continued to make fresh prints all through June. For now, at least, it looks like this well-justified momentum is going nowhere.

Upgrades Galore

The folks over at Deutsche Bank were out before the start of Friday’s session with an upgrade on eBay’s stock, raising it from a Hold to a Buy and slapping a price target of $57 onto the shares. The firm recently ran a consumer survey and, based on the responses, believe the company is going to comfortably surpass analyst expectations with their Q2 earnings. They’ve now joined their peers across the street, Wells Fargo and Bank of America, in highlighting the future potential of a company that’s already motoring along nicely.

In the second week of June, Wells Fargo had upgraded eBay stock to Equal Weight from Underweight. Analyst Brian Fitzgerald noted at the time that "we view accelerating growth and persistence of digital demand as strong positives that likely outweigh enhanced fulfillment capabilities among omnichannel players”.

At the same time, he remained cautious with regards to management’s optimism surrounding their Classifieds business which is undergoing a strategic review and is touted to be up for sale. Less than two weeks previously, Bank of America had struck a bullish tone when they zeroed in on this possibility specifically and noted there were multiple bidders in the works.

Bright Days Ahead

Management hasn't been slow to signal the bright days ahead to investors either. Also at the start of this month, they raised Q2 EPS guidance to $1.02 to $1.06 from $0.80 prior in a move that sent shares up 9% in a single day. Q2 results are due around the end of July, so in the meantime, investors can content themselves with the high end of the revised range showing upwards of 19% in organic, FX-neutral revenue growth.

Despite COVID-19 causing one of the most vicious stock market crashes in history, it has no doubt fuelled a roaring bull market for e-commerce and internet retail stocks. And even with concerns mounting over a cresting second wave that will out-do the first in terms of hard numbers, the associated fresh shutdowns and canceled re-openings of non-essential businesses will find it hard to frighten investors as much this time. eBay has prospered from the first wave, there’s every reason to think it will continue to do so in with the second.