eBay jumps after upgrade
Morgan Stanley raises stock's rating to strong buy from outperform.
February 28, 2002: 12:09 p.m. ET
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NEW YORK (CNN/Money) - EBay shares were up almost 6 percent Thursday afternoon after Morgan Stanley raised its investment rating on the stock, citing price and the online auction firm's likelihood of outperforming the market and its peers.
The brokerage firm said in a research report released Thursday that it has raised its rating on the online auction site to "strong buy" from "outperform." It said eBay is the firm's top Internet stock pick based on its risk-adjusted probability of outperforming the market and its peers, and its best stock pick based on relative fundamentals, likelihood of meeting or beating estimates, and valuation potential.
"We have been waiting for a slow pitch down the middle of the plate, and we think eBay at $49 may be what we have been waiting for," the report said. Morgan Stanley has no price target on the stock.
Ebay (EBAY: up $2.89 to $52.00, Research, Estimates), headquartered in San Jose, Calif., is likely to see operating income grow by 73 percent in 2002 to $314 million, and by 51 percent in 2003, to $475 million, Morgan Stanley said. On the revenue front, Morgan Stanley expects 49 percent growth in 2002, to $1.1 billion, and 45 percent to $1.6 billion in 2003.
Ebay also is likely to see international revenue grow by more than 125 percent to $256 million in 2002, which would represent 23 percent of eBay's total revenue, Morgan Stanley said.
Morgan Stanley also is maintaining its "V" for "more volatile" tag on the stock. The firm's "V" tag means that the stock either has a 25 percent chance in the next month of a price move of 25 percent or more, or, in the analyst's view, is likely to become materially more volatile in the next one to 12 months as compared with the previous three years.
On Wednesday, W.R. Hambrecht & Co. reiterated its $75 price target and "strong buy" rating on the stock, citing eBay's Tuesday announcement that it would withdraw from Japan but expand into Taiwan with the acquisition of NeoCom. Japan is the only major market in which eBay has struggled, Hambrecht said, while Taiwan is the third-largest e-commerce market in Asia and the ninth largest in the world.
Both Morgan Stanley and Hambrecht noted that eBay is making progress in fixed-priced trading, which Hambrecht says represents a "massive" opportunity in the next three to five years. 
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