eBay and ServiceNow: Downgrades and Revised Estimates


Oct. 24 2019, Published 10:37 a.m. ET

eBay (EBAY) shares are trading 7.8% lower in pre-market today. In contrast, ServiceNow (NOW) stock has gained 7% in pre-market trading. So, what’s driving these stocks?

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eBay downgraded after weak forecast

eBay announced its third-quarter results after the market close on Wednesday. Although the company beat analysts’ estimates in the September quarter, its forecast was lower than analysts’ expectations.

Several analysts downgraded eBay, according to multiple reports from The Fly. According to Raymond James analyst Aaron Kessler, eBay shares will likely be rangebound until it can increase earnings growth. Kessler downgraded eBay from “outperform” to “market perform” with a target price of $45. The downgraded was due to softness in the eBay Marketplace and its guidance for 2020.

Aegis analyst Victor Anthony also downgraded eBay from “buy” to “hold.” He has a target price of $40—down from $45. Although Benchmark analyst Daniel Kurnos reiterated a “buy” rating on eBay, he revised the target price from $47 to $45. Meanwhile, Baird analyst Colin Sebastian maintained a “buy” rating and reduced the target price from $46 to $44.

The earnings call didn’t impress Mizuho analyst James Lee. He lowered eBay’s target price from $36 to $33. Lee maintained an “underperform” rating and lowered the 2021 earnings forecast from $3.03 to $2.80.

Piper Jaffray maintained a “neutral” rating and lowered the target price on eBay from $38 to $37. After accounting for the decline in the pre-market today, eBay stock is trading at $35.9.

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RBC slashed ServiceNow’s target price

After losing around 4% on Wednesday, ServiceNow made a strong comeback today. Investors were concerned about CEO John Donahue’s departure. He was ServiceNow’s CEO for more than two years.

ServiceNow also announced its third-quarter earnings on Wednesday. The company reported revenues of $885.8 million with an EPS of $0.99. Although the company’s sales rose 32% year-over-year, they were marginally below analysts’ estimate of $886 million. The company beat the EPS estimate of $0.88 in the September quarter.

Jefferies analyst Samad Samana reiterated a “buy” rating on ServiceNow and reduced the target price from $330 to $280. RBC Capital lowered ServiceNow’s target price from $320 to $286. Raymond James also cut the target price from $342 to $300.

Edward Parker from BTIG raised the stock’s target price from $280 to $320 due to better-than-expected subscription revenues and third-quarter billings. Cowen thinks that the recent weakness in ServiceNow presents a buying opportunity for investors. The stock is trading 22% below its 52-week high. Cowen analyst J. Derrick Wood reiterated an “outperform” rating and a target price of $315 for the stock.

After accounting for the gain in pre-market today, ServiceNow stock is trading at $236.5.


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