By IB Times Staff Reporter: Subscribe to IB's RSS feed
September 1, 2010 2:21 PM EDT
Caris & Co. reiterated its ‘buy’ rating on shares of cyber shopping website eBay Inc. with a price target of $32.
“We are running our monthly proprietary sample survey to track the changes eBay has been implementing to transform its Marketplaces. As highlighted in our initiation report and our note on eBay's June quarter results, we believe these changes are not only showing tangible results now but also can become a source of margin improvement in the coming quarters,” said Sandeep Aggarwal, an analyst at Caris.
The analyst believes that the fee and search changes implemented on March 30, 2010 are growing listings at eBay very dramatically (up 15 percent year-over-year by his estimate for second quarter of 2010) while the number of total items sold is rising (up 11 percent year-over-year organic in second quarter of 2010) even with a slightly lower listings conversion rate.
The analyst believes that improved Detailed Seller Ratings for merchants, Top Rated Seller program, full roll-out of Buyer Protection, and Free Shipping penetration of 30 percent on page one under Best Match are enhancing the value proposition of Marketplaces and improving listings conversion.
In addition, a series of fee changes are encouraging more listings (i.e. higher Selection) and improved Search algorithms are putting the best listings on the first page under Best Match vs. getting buried in the tail-end or mid of search results, Caris said in a report to clients.
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The analyst said eBay, as discussed on its second quarter earnings call, is selling more items now although the total number of merchants selling effectively may be going down.
“In our view, eBay made the fee changes on March 30 and started showing store inventory in listings results only after optimizing its “Best Match” results by fine-tuning the weights assigned to DSR score, Top Rated Seller, and Free Shipping. We believe that eBay has made good progress in improving the Search experience and it will continue to get better during second half of 2010,” said Aggarwal.
eBay shares were trading up 2.24 percent at $23.75 on the Nasdaq at 10:18 am EDT.
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