EBay Faces Competition From Google
Published April 4th, 2006
Deutsche Bank Securities cut the price target on eBay to $40 from $44 and said the risk is rising for shares of the Internet auction firm as competition from Google looms.
Trading in eBay (nasdaq: EBAY - news - people ) shares will “remain choppy through the summer months,” wrote analyst Jeetil Patel in a client note today.
The Deutsche Bank analyst said listings comparisons will be tougher for eBay through May. He also said competition will increase from Google Base, the search giant’s craigslist-like listings site.
Early unconfirmed reports regarding the commission structure for Google Payments indicate Google (nasdaq: GOOG - news - people ) may charge 25 cents per transaction plus 2.5% of the sale price, undercutting eBay unit PayPal’s standard rate of 30 cents and 2.9%, according to the analyst.
Should eBay try and match such a rate, the company would lose $150 million in annual revenue, or about 7 cents per share, said the analyst.
eBay could also be challenged by a potential entry into classified listings and e-payments by Microsoft (nasdaq: MSFT - news - people ). “Needless to say, the competition vying for eBay’s growth is mounting from several different media properties,” said Patel.
The Deutsche Bank analyst maintained a “hold” rating on eBay and said shares are trading in-line with other Internet media companies such as Yahoo! (nasdaq: YHOO - news - people ) and Google.
The Internet auction firm will report first-quarter earnings on April 19. “Once again, the next few weeks will likely be critical for eBay given the healthy amount of promotions last year.”
EBay bought a 25% stake in classified ads Web site craigslist in August 2004.
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