RBC downgraded eBay (EBAY) to sector perform from outperform, after the company recently posted its first quarter results.
eBay had 17 cents earnings per share (EPS) and said it expects 14 to 16 cents in the second quarter, as well as 65 cents to 71 cents in 2006.
Analyst Jordan Rohan says the first quarter top-line and bottom-line results were both in line with his estimates. However, he says average selling prices (ASPs) of goods sold appear to have fallen in the first quarter -- the second quarter in a row of disappointing performance on that metric. Also, he thinks Google's efforts in classifieds and payment systems will at some point encroach on eBay's core franchises as well as hasten revenue deceleration. To reflect these factors, he cuts his $1.06 2006 EPS estimate to 99 cents and his $1.39 2007 estimate to $1.28. He lowers his $50 stock price target to $42.