EBay Stock Drops on Mixed Analyst Views

EBay (Nasdaq: EBAY) stock fell 7.74 percent to US$49.11 in trading Wednesday after analysts expressed concerns about the auction giant's recent transactions. The stock rebounded to $51.35 in early trading Thursday.

Earlier this week, EBay said it plans to purchase Taiwanese online auction company NeoCom for $9.5 million. The company also said it will close its Japanese site by March 31st amid stiff competition from other auction companies, including Yahoo! Japan.

Analysts Cautious

Robertson Stephens analyst Lauren Cooks Levitan said the NeoCom acquisition will not have a significant effect on the company's outlook but could limit near-term gains in EBay's stock price. Levitan reiterated her buy rating on the stock.

Lehman Brothers analyst Holly Becker said EBay's various expansion plans could lead to substantial execution risk. While the NeoCom acquisition will increase EBay's expansion into Asia, "management does seem to have its plate full with new initiatives, both domestically and internationally," Becker said.

Becker also called EBay's withdrawal from Japan "somewhat of a disappointment," since the country is the second largest e-commerce market. The move exemplifies the difficulties of operating internationally and breaking into online auction markets where another company already dominates, she said.

In addition, Becker expressed concern over EBay's continued reliance on advertising. She said the company may not be able to sustain a strong increase in ad revenue.

A Positive Light

W.R Hambrecht saw EBay's moves in Asia in a more positive light and reiterated its strong buy on the company. Analyst Derek Brown said the NeoCom acquisition extends EBay's reach in Asia, while the Japan closing shows that management is taking steps to address a clear problem.

"The property has been losing traction and losing money, with no obvious catalyst for a turnaround in sight. Accordingly, management elected to effectively start over, rather than continue down the same slippery slope," Brown said.

Brown said he remains bullish on the company, pointing out that EBay's business is strong and that its recent price increase "has been absorbed without so much as a hiccup."

Price Fixing

Brown also cited EBay's progress with fixed-price trading 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 been implementing over the last few months with its integration of Half.com, eBayStores and the BuyItNow button -- will draw many more buyers and sellers to join the EBay community because it offers a more familiar way to buy goods.

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

Policy Changes

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

EBay now will collect more information from users, including multiple shipping addresses and payment options. EBay also reserves the right to inform other users of a member's actions if the company feels it will "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.