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Why Morgan Stanley Downgraded eBay

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Stock downgraded and price target lowered

Morgan Stanley downgraded eBay (EBAY) stock to “equal-weight” from “overweight” last month, according to a note to investors cited by CNBC. At the same time, the firm cut its 12-month price target on eBay stock from $55 to $33. Before it upgraded eBay to “overweight” in April, Morgan Stanley had an “underweight” rating on the stock.

In downgrading eBay, Morgan Stanley noted that the company’s gross merchandise value (or GMV) growth was slower than it expected in 2018 and that it expects the slowdown to continue in 2019. For ecommerce companies, GMV measures the total value of items sold over a given period. eBay’s GMV was $22.7 billion in the third quarter of 2018, up 5.0% year-over-year. But the GMV growth slowed from 8.0% in the third quarter of 2017.

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Emerging revenue opportunity in payments and advertising

In addition to deteriorating GMV growth, Morgan Stanley also cited stiff competition in the ecommerce industry as another major challenge eBay faces. But the firm also noted that eBay has attractive emerging revenue opportunities in the payments and advertising markets. With more online shoppers beginning their product search on marketplaces, ecommerce platforms like eBay have taken on new significance as advertising spots for brands seeking to connect with consumers.

eBay’s revenue rose 6.0%

eBay generated revenue of $2.6 billion in the third quarter of 2018, representing an increase of 6.0% year-over-year, compared to revenue growth of 58% at Shopify (SHOP), 54% at Alibaba (BABA), and 29% at Amazon (AMZN). JD.com (JD) grew its revenue 25%.

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