Better search rankings seen key to eBay's growth

Reuters News
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Posted: Oct 22, 2015 12:45 PM

By Abhirup Roy

(Reuters) - After a surprisingly strong quarter shorn of PayPal, further growth for eBay Inc <EBAY.O> will rest on its ability to make its website more visible to those searching for items to buy.

EBay's shares rose as much as 13.5 percent on Thursday, a day after the company reported a better-than-expected profit for its first quarter since it spun off PayPal Holdings Inc <PYPL.O>, the payments processing business that had been its main engine of growth.

At least seven analysts covering eBay's stock raised their price target, to a high of $33, while at least two cut their targets, to a low of $29. EBay's shares were trading at $26.89 at midday.

EBay, a pioneer in online auctioning, is facing growing competition from not only rivals such as Amazon.com Inc <AMZN.O> but from traditional retailers such as Wal-Mart Stores Inc <WMT.N> that are boosting their presence online.

Investors had feared the worst ahead of the release of the company's third-quarter results. Instead, eBay raised its full-year adjusted profit forecast.

"The results demonstrate the sound thinking behind reducing eBay to a more focused business that can concentrate on investing in, and evolving, its marketplaces rather than being distracted by payments or business services," said Neil Saunders, chief executive of retail research firm Conlumino.

"Over the longer term we believe this will pay dividends, although it is clear that, with much work to do, it may take some time to deliver better results."

To boost user experience, eBay has made it mandatory for some of those selling products on its website to provide more detailed information about the goods on offer.

The requirement, currently applied to resellers across 18 product categories in the United States, Britain, Germany and Australia, is helping eBay to better catalog and market these products - making them easier to find online.

"Our plan is to expand the requirement where relevant across all sites and categories by the end of 2016," Chief Executive Devin Wenig said.

As well as the tough competition, eBay has been hurt by changes in Google's algorithm, which pushed its results lower in search rankings.

Though the company added a net 8 million new active buyers in the quarter, an increase of 5 percent, this was a far cry from the double-digit growth rates achieved until about two years ago.

Of 39 analysts covering the stock, 26 have a "hold" rating, 12 a "buy" or higher and one a "sell".

(Reporting by Abhirup Roy in Bengaluru; Additional reporting by Eileen Soreng; Editing by Robin Paxton and Ted Kerr)