What do eBay (Nasdaq: EBAY) and San Jose, Calif. rockers Smash Mouth have in common? Well, they both had some huge hits in the late 1990s, but we really haven't heard a lot out of either of them lately.
I don't know what Smash Mouth is up to these days, but eBay is usually making headlines for all of the wrong reasons.
Its namesake marketplace has been meandering in recent years. It sold off two-thirds of Skype two years ago for billions less than what Microsoft (Nasdaq: MSFT) was willing to pay earlier this year. PayPal has been the resilient bright spot, though it recently took a hit in China by ending its relationship with Alibaba. eBay has nibbled at mostly smallish acquisitions, but few are likely to move the needle the way that PayPal has done.
However, at least one analyst sees eBay differently than I do.
Pacific Crest's Steve Weinstein raised his rating on eBay -- from sector perform to outperform -- and kicked in an ambitious price target of $40.
After years of watching Craigslist and other free listing sites eat at its business and having CarMax (NYSE: KMX) clean up the auto resale market at the expense of eBay's automotive resales, Weinstein feels that the dot-com giant's core business is beginning to gain some positive momentum.
The problem is that eBay's stock has already been on a tear since the market bottomed out in March of 2009. The stock has more than tripled off those lows, despite lukewarm improvement in the fundamentals along the way.
It also remains to be seen if PayPal will have the same kind of impact on mobile payments as it has in traditional Web-based transactions. After all, it's not a coincidence that Google (Nasdaq: GOOG) -- a company that has swung and missed at PayPal with Google Checkout -- is sitting pretty in mobile with its Android platform. It wouldn't shock anyone if Apple (Nasdaq: AAPL) finally throws its hat into the ring by incorporating near-field communication technology into the iPhone in a year or two, revolutionizing the way payments are made on the go.
I definitely wouldn't short eBay. PayPal is still a beast, and the baby steps that its marketplace segment is taking are in the right direction. eBay is also a cash-rich company, and that's before we consider its chunk of the Skype sale. However, I think the stock has already discounted a lot of the mildly positive developments that Pacific Crest feels will take the stock even higher.
Sorry, eBay. I'll pass.
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