Citigroup Downgrades EBay to 'Sell'

Analyst Lanny Baker cites concerns from used-car dealers about the eBay's pricing and auction format in the motors category

Citigroup downgraded Internet auction giant eBay (EBAY ) to sell from neutral.

Analyst Lanny Baker says he's concerned about eBay Motors, the company's largest auction category. He notes the motors group has propelled 35% to 40% of growth in eBay's gross merchandise sales in the last two years, and now accounts for 28% of gross merchandise sales.

A survey of 150 used car dealers suggests that while 30% of used-car dealers in the U.S. are using eBay Motors, about 40% found eBay's prices and auction format to be a drawback. In particular, Baker says the motors' group pricing model is problematic; he's skeptical of its ability to raise prices without broader pricing model changes. Baker sees a downside risk to $48.

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