UBS Downgrades Ebay, Farfetch to Neutral on Risk Guided by Investment.com
© Reuters. UBS Downgrades Ebay (EBAY), Farfetch (FTCH) to Guidance Risk Neutral
By Senad Karaahmetovic
UBS analyst Kunal Madhukar downgraded Farfetch (NYSE:) and eBay (NASDAQ:) shares to Neutral from Buy.
EBAY stock is slashed along with a target price (from $60.00 to $48.00 per share) despite low expectations. However, the analyst predicts the GMV in 2022 will fall 17%, below the guideline of 16%-14% and the Street consensus of 15%.
“We think the buyers may have been lower than the Street. Since the start of the year, the stock has been one of the better performers in the E-Commerce sector, benefiting from both a ~2% dividend yield and aggressive stock buybacks. However, as the market recovers, we think EBAY stock could lag behind smaller cap stocks (which are likely to grow much faster in the recovery) until investors have a better vision of organic growth at eBay. As such, we think the stock will likely remain range-bound until visibility improves,” Madhukar told clients in a note.
Farfetch stock’s price target is up to $10 from $13 previously because Madhukar sees over-optimistic growth assumptions on the part of the company’s management.
“In addition to slower growth, we believe growth is limited by a lack of visibility into key drivers of value, including FPS volume and economics, as well as on China. Even so, the YNAP deal could be a positive catalyst (association), but if disclosure is limited (as with the recent deal with Neiman Marcus Group or NMG), it could be a challenge. for investors to understand whether it creates shareholder value. Ultimately, FTCH remains a nonprofit technology company in an environment where investors are deeply focused on profitability and, therefore, have limited valuation support,” the analyst added.
Similar to eBay, Madhukar sees the stock remaining “limited in range until we have a better view of growth and/or a path to profitability.”
Shares of eBay and Farfetch fell 2.4% and 2.2%, respectively, in pre-trade Tuesday.