EBay slides following analyst downgrade (EBAY)
By Tomi Kilgore, CBS MarketWatch.com
Last Update: 10:34 AM ET Sep 30, 2002
EBay (EBAY) is sliding $3.59, or 6.2 percent, to $53.91 after RBC Capital Markets downgraded the online auctioneer to "underperform" from "sector perform" on concerns that disappointing demand for practicals, poor incremental traffic and concerns over PayPal's loss of independence will negatively impact the company's long-term growth rate. Analyst George Sutton also cut his price target to $45 from $70. Meanwhile, Sutton said EBay should "slightly exceed" his third quarter estimates due to strong transaction volumes.
__________________________________
Overture extends MSN partnership
By Bambi Francisco, CBS.MarketWatch.com
Last Update: 9:42 AM ET Sep 30, 2002
SAN FRANCISCO (CBS.MW) -- In a sigh of investor relief, shares of Overture shot up 9 percent on word the paid-listings company extended two contracts with Microsoft.
Overture (OVER) jumped $2.07 to $24.10.
Its contract to provide search results for Microsoft's MSN network was to expire December 2003, but was extended through 2004. A separate deal to provide the "Search Pane" in Microsoft's (MSFT) Internet Explorer browser was to end Monday and was extended through December 2003.
Overture said it expects "no change to its July 25 forecast, including traffic acquisition costs" due to the renewed contract.
The MSN deal includes new sites for Germany and France and a test in Japan once Overture launches there in the fourth quarter.
To buy or not to buy EBay
As hopes for a long-term recovery in online advertising spending are pushed out further into the future, CS First Boston's Heath Terry says that investors should focus on commerce companies. He would recommend buying into Amazon.com (AMZN) and EBay (EBAY) on pullbacks.
Over at RBC Capital Markets, George Hutton is advising his clients to essentially take profits if they're holding onto EBay. Hutton downgraded the auction operator and lowered his price target to $45. He attributes his action due to "disappointing demand for practicals, poor incremental traffic for Stores and a concern with PayPal's loss of independence." His price target is based on sales growth that decelerates to 25 percent and operating margins increasing to 36 percent in 2005. He's assuming a 40 percent tax rate and required annual return is 15 percent.
With regards to PayPal (PYPL), Hutton, who admits that he's been skeptical of this combination from the start, said that that there is "clear willingness to entertain new payment alternatives" on EBay.
Shares of EBay fell 6 percent to $54.03.
Free delivery
Get free e-mail delivery of Bambi Francisco's Net Stocks daily. Sign up now. You can also subscribe to Bambi Francisco's Net Sense, a weekly commentary.
------------------------------------------------------------
Bambi Francisco is Internet editor of CBS.MarketWatch.com, based in San Francisco |
