Deutsche says buy eBay as late stages of transformation seen driving upside

Shares of eBay (EBAY) are on the rise after Deutsche Bank analyst Ross Sandler upgraded the stock to Buy, citing the company's "re-platforming" strategy. Using Expedia (EXPE) as an example, the analyst pointed out that re-platforming stories "tend to work." BEST STORY IN INTERNET: Deutsche Bank's Sandler upgraded eBay to Buy from Hold and raised his price target on the shares to $40 from $30. The analyst told investors he thinks the company is in the latter stages of its re-platforming, which is the time period where select internet stocks historically tend to generate the most "alpha," or outperformance compared to a benchmark index. Expedia, for example, went from a $6B market cap to over $30B in the 24 months coming out of its re-platforming back in 2011, he noted. Further, Sandler expects eBay to outperform its internet peers over the next 2 years, and believes it presents a "great alternative" investment idea to "the crowded best-of-breed stories" like Amazon (AMZN), Facebook (FB) and Alphabet (GOOGL; GOOG). With few out-of-favor accelerating-growth stories with upside to estimates and a reasonably low valuation, eBay might be "the best story in internet heading into 2017," he argued. MEANINGFUL UPSIDE POSSIBLE: Sandler also told investors that he sees reported buyer growth picking up slowly with current-quarter buyers growing much faster, which is a leading indicator for faster gross merchandise value growth in 2017. Additionally, he pointed out that churn is stable, re-activation of buyers is growing again, and the company recently embarked on a broader branding campaign which should bring in new buyers. While consensus is only calling for 4% revenue growth over the next 2 years, the analyst sees potential for meaningful upside. PRICE ACTION: In morning trading, shares of eBay have gained about 3% to $32.79.