Elliott's EBay Plan Loses Some of Early Wall Street Enthusiasm

(Bloomberg) -- Analysts covering EBay Inc. expressed mixed views on Elliott Management’s five-step plan for the company, which includes a portfolio review and share buybacks. KeyBanc agreed with Elliott that the company is undervalued, while SunTrust said it wasn’t surprised by the announcement and Atlantic Equities doubts the plan will work.

Meanwhile, the Wall Street Journal reported that another activist investor, Starboard Value LP, has built a position of less than 4 percent in the online retailer. Shares of EBay, which lost 26 percent in 2018, surged as much as 12 percent Tuesday, the most in almost a year.

Here’s what Wall Street is saying:

KeyBanc, Edward Yruma

As Elliott said, EBay’s valuation doesn’t reflect its place as a leading e-commerce player, and it’s been trading below its peers. But macroeconomic conditions that affect consumer spending, increasing pressure in e-commerce and a potential Walmart and Amazon duopoly could prevent eBay from reaching the target price.

Rates overweight, PT $43

SunTrust, Youssef Squali

It’s not surprising to see activists take a strong interest in eBay, “given the stock’s recent under performance as well as our long held belief that there is an opportunity to spin-off assets to enhance shareholder value.”

The letter is effectively calling for new management, and Elliott may seek board representation to effect change at some point as well. Still, SunTrust remains on the sidelines as it says EBay will continue to struggle in the “increasingly competitive e-commerce environment.”

Rates hold, PT $33

Atlantic Equities, James Cordwell

Elliott’s plan won’t improve EBay’s competitiveness: “potentially quite the opposite.” The activist’s letter outlines the classic plan -- cut costs, sell assets and return capital to shareholders.

“It speaks volumes that despite surveying 10,000 buyers, 700 sellers and enlisting consultants, investment bankers, accountants, lawyers and former company executives, the only concrete proposal put forward to improve topline performance is to ‘expand the universe of what is transacted on its Marketplace.”’

Rates neutral, lowers price target to $33 from $34

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