eBay (EBAY) shares are rising early on Wednesday despite price trimming from analysts covering the stock.
Shares rose by as much as 6.9% Wednesday morning after an earnings release that beat on earnings per share and matched expectations on revenue.
Third quarter non-GAAP earnings per share rose to $0.56 beating estimates by $0.02, while revenue came in at $2.65 billion for the quarter.
"We are evolving our approach and plan to further target our product and marketing resources to address the needs of both new and existing users," CEO Devin Wenig told analysts during the earnings call last night. "At the same time, we will invest aggressively to deliver significant growth opportunities in Payments and in Advertising."
The narrow earnings beat and comments on continued investment seem to have been enough to have market enthusiasm seen this morning.
Yet, the forecast from executives cautioning "slower top line growth" due to the increased investment plan has led to widespread price trimming on Wall Street.
A whopping 19 analysts trimmed targets according to FactSet data, while two downgraded from a "Buy" to "Hold" rating.
"Advertising and payments are potential long-term growth drivers, but near-term revenue growth is expected to be low-to-mid single digits," Piper Jaffray analyst Michael Olson explained. "eBay has the broad secular tailwind of offline-to-online retail in eCommerce, but the company has more work to do to successfully rebrand itself."
As such, Olson trimmed his price target to $32 from $40 and maintained his neutral rating.
The concerns and tempered estimates not withstanding, many analysts were relieved that the results were not as bad as had been feared amid the PayPal (PYPL) spinoff.
"Overall, we are encouraged by eBay's strategic shift to focus on more profitable growth & potentially return more capital to shareholders," JP Morgan analyst Doug Anmuth noted. "Expectations were low following eBay's de-facto preannouncement via PayPal on October 18, and reported results were not as bad as feared."
He acknowledged that the tough competitive landscape, coupled with a narrow beat on earnings and bleak forecast, should temper expectations for next year as he too trimmed his price target from $41 to $33 but was optimistic on the "more profitable growth" available to the streamlined entity.
Additionally, the softened guidance might be worked against due to higher levels of share repurchases coming from the company.
"The company repurchased another $1 billion of shares in the quarter, bringing the year-to-date buyback to $3 billion," Deutsche Bank analyst Lloyd Walmsley noted. "On the call, management noted it is likely to continue to aggressively buy back shares over the next 18 months transition period."
Walmsley significantly lowered his price target from $46 to $37 ahead of the oncoming softness, but maintained his "Buy" rating. He said that the selloff that has led to a 27.4% decline in shares so far in 2018 has been overdone and expects the company has remaining room to grow.
The market seems content to bid on eBay as well even with the lessened opportunity outlined by analysts.