Option Trade 
eBay Inc (NASDAQ:EBAY) Calls 
Monday, April 20, 2015

**OPTION TRADE: Buy the EBAY Jul 2015 55.000 call (EBAY150717C00055000) at or under $3.20. Place a protective stop loss at $1.20, and a pre-determined sell at $6.00.

by Ian Harvey

April 20, 2015

Introduction

eBay Inc (NASDAQ: EBAY), which operates an online trading community, is scheduled to report its quarterly earnings on Wednesday, April 22, after markets close.

In a report published on Friday, Bank of America Merrill Lynch predicted a positive earnings release for eBay Inc. The firm expects eBay's earnings and revenues to surpass consensus estimates and remain on top of the management’s guidance for the first quarter of fiscal 2015 (1QFY15). The sell-side research firm reiterated a Buy rating with a price objective of $64 on the stock.

Merrill Lynch expects the company to report a beat on bottom and top-line numbers for the quarter, as it projects earnings per share (EPS) of 71 cents on revenue of $4.44 billion. The market consensus stands at 70 cents for EPS and $4.42 billion for revenue, whereas the guidance points to a 68-71 cents range for EPS and a $4.35-4.45 billion range for revenue.

Technical Details

eBay has a 52 week low of $46.34 and a 52 week high of $60.93. The stock’s 50-day moving average is $58.00 and its 200-day moving average is $55.00.

The company has a market cap of $67.51 billion and a P/E ratio of 1507.84.

Earnings

eBay last issued its quarterly earnings data on Wednesday, January 21st. The company reported $0.90 EPS for the quarter, beating the Thomson Reuters consensus estimate of $0.89 by $0.01. The company had revenue of $4.90 billion for the quarter, compared to the consensus estimate of $4.93 billion.

During the same quarter in the prior year, the company posted $0.81 earnings per share. On average, analysts predict that eBay will post $3.10 earnings per share for the current fiscal year.

Merrill Lynch affirms a Buy rating on eBay stock. It considers the stock valuation as attractive, with 14x marketplace multiple compared to its competitors. They also believe that PayPal trends remain robust and the new management might lift business optimism.

Hedge Fund Backing

The founder of Ivory Capital, Curtis Macnguyen, initiated a stake in eBay Inc during the fourth quarter with 2.06 million shares valued at $115.81 million. The e-commerce company, which is planning to spin off its payment arm PayPal sometime later this year represented 3.72% of the fund’s equity portfolio.

Another 87 hedge funds have also invested $11.2 billion in the $69.87 billion market-cap company. And eBay is one of the favorite stock picks among the billionaires, with Carl Icahn being one of them, as his fund Icahn Capital LP held some 46.27 million shares of eBay Inc valued at $2.60 billion at the end of 2014.

Analysts Opinions

eBay was upgraded by analysts at Vetr from a sell rating to a hold rating this morning. The firm currently has $58.33 target price on the stock.

In a research note published on Friday, 10th April, JMP Securities reiterated a Market Perform rating on eBay Inc. stock.

The company has also been the subject of a number of other research reports:-

• A recent analyst activity consisted of Piper Jaffray downgrading their Neutral rating to Underweight on March 19. Piper Jaffray decreased price target from $55 to $49. This corresponds to a 14.1% downside from the last closing price. On the date of report, the stock closed at $57.88.

• Susquehanna upgraded their Neutral rating to Positive on March 13, and increased their price target on EBAY from $59 to $75. This corresponds to a 31.49% upside from the last closing price. On the date of report, the stock closed at $59.07.

• A third research firm was Axiom who initiated their coverage on the stock with Hold rating on March 9. Axiom fixed their price target at $60. This translates to a 5.19% upside from the last closing price. On the date of report, the stock closed at $60.81.

• Finally, analysts at Bank of America set a $64.00 price target on shares of eBay and gave the company a “buy” rating in a research note on Thursday, February 26th.

Out of 47 analysts covering eBay stock, 23 rate it a Buy, 21 recommend a Hold, while only four advocate a Sell. The consensus price target on the stock is $59.51, showing an upside potential of 3.8% on the current trading price.

Conclusion

Ebay Inc has seen strong growth in payments business as well as its non-auction e-commerce business. Analysts expect that the company will continue to benefit from the rise in demand for mobile devices, as consumers increasingly use their smart phones and tablets to shop online.

Therefore, based on the facts above the following options trade is recommended…..


**OPTION TRADE: Buy the EBAY Jul 2015 55.000 call (EBAY150717C00055000) at or under $3.20. Place a protective stop loss at $1.20, and a pre-determined sell at $6.00.



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