EBay Stock Drops on Mixed Analyst Views

EBay (Nasdaq: EBAY)stock fell 7.74 percent to US$49.11 in trading Wednesdayafter analysts expressed concerns about the auctiongiant’s recent transactions. The stock rebounded to $51.35in early trading Thursday.

Earlier this week, EBay said it plans to purchaseTaiwanese online auction company NeoCom for $9.5million. The company also said it will close itsJapanese site by March 31st amid stiff competitionfrom other auction companies, including Yahoo! Japan.

Analysts Cautious

Robertson Stephens analyst Lauren Cooks Levitan said the NeoCom acquisition will not have a significanteffect on the company’s outlook but could limitnear-term gains in EBay’s stock price. Levitan reiteratedher buy rating on the stock.

Lehman Brothers analyst Holly Becker said EBay’svarious expansion plans could lead to substantialexecution risk. While the NeoCom acquisition willincrease EBay’s expansion into Asia, “management doesseem to have its plate full with new initiatives, bothdomestically and internationally,” Becker said.

Becker also called EBay’s withdrawal from Japan”somewhat of a disappointment,” since the country isthe second largest e-commerce market. The moveexemplifies the difficulties of operatinginternationally and breaking into online auctionmarkets where another company already dominates, she said.

In addition, Becker expressed concern over EBay’s continuedreliance on advertising. She said the company may not be ableto sustain a strong increase in ad revenue.

A Positive Light

W.R Hambrecht saw EBay’s moves in Asia in a more positive light andreiterated its strong buy on the company. AnalystDerek Brown said the NeoCom acquisition extends EBay’sreach in Asia, while the Japan closing shows thatmanagement is taking steps to address a clear problem.

“The property has been losing traction and losingmoney, with no obvious catalyst for a turnaround insight. Accordingly, management elected to effectivelystart over, rather than continue down the sameslippery slope,” Brown said.

Brown said he remains bullish on the company, pointing outthat EBay’s business is strong and that its recent priceincrease “has been absorbed without so much as ahiccup.”

Price Fixing

Brown also cited EBay’s progress with fixed-pricetrading as an ace in the hole for the auction giant.Brown said fixed-price trading “represents a massive,largely untapped opportunity for EBay.”

Brown said he believes the new format — which EBay has beenimplementing over the last few months with itsintegration of Half.com, eBayStores and the BuyItNowbutton — will draw many more buyers and sellers to jointhe EBay community because it offers a more familiarway to buy goods.

In addition, fixed-price trading will speed up therate at which purchases are made, which will help EBaycompete against e-tailers like Amazon and Yahoo!Shopping.

Policy Changes

Separately, EBay changed its privacy policy, effectiveMarch 19th for new users and April 19th for usersregistered prior to March 19th.

EBay now will collect more information from users,including multiple shipping addresses and paymentoptions. EBay also reserves the right to inform otherusers of a member’s actions if the company feels itwill “keep our community safe and secure.”

EBay also revised its user agreement so visitors need register only once to use both EBay and Half.com.