Stock Picks: eBay, Ford, Goldman Sachs

Wall Street analysts offer buy, sell, or hold opinions on stocks in the news on Oct. 20

EBay: BCG Partners equity analyst Colin Gillis maintained a hold rating and $25 price target on shares of eBay(EBAY) on Oct. 20.

In a note, Gillis said that when eBay reports third-quarter results after the close of trading on Oct. 20, he estimates revenue of $2.233 billion, an increase of 0.8 percent from the preceding quarter, but a 0.2 percent decline from a year earlier. He estimates earnings per share (EPS) of 37¢, compared to EPS of 40¢ in the prior quarter and 46¢ in the prior year.

Gillis said he expects "another strong quarter" from the company's PayPal unit, with net revenue potentially exceeding $850 million, an increase of 23 percent year-over-year and 4 percent from the preceding quarter. "We see that PayPal is emerging as the dominant Internet payments platform as it powers the underlying payments for Facebook," Gillis said.

The analyst said eBay has a "solid" strategy for the mobile computing market. The company estimates that the eBay mobile marketplace application will generate $1.5 billion in gross merchandise volume in 2010, approximately 2.5 times that of 2009, he said.

Gillis noted that eBay shifted its marketplace revenue model in the second quarter to be more aligned with the sale of a good, rather than the listing of a good. "[W]e expect there may be one or two more quarters of negative impact before the longer-term benefits of more supply of goods overtakes the impact of the pricing model change," he said.

"We are incrementally more positive on eBay as we move into the holiday season, but we also look for signs of an acceleration of marketplace improvements," Gillis said.

Ford Motor: Soleil Securities maintained a buy rating on shares of Ford Motor (F) on Oct. 20. A price target on the shares was increased to $20, from $18.

In a note, equity analyst Michael Ward said he raised EPS estimates for 2010 to $1.95, from $1.75; for 2011 to $2.20, from $1.95; and for 2012 to $2.35, from $2.10.

"Ford's cost and revenue restructuring have positioned the company to be a prime beneficiary of an improving industry environment," the analyst said.

A faster-than-expected improvement in the company's balance sheet "adds support to our buy rating," Ward said.

Goldman Sachs Group: Credit Suisse equity analyst Howard Chen maintained an outperform rating and $190 price target on shares of Goldman Sachs Group (GS) on Oct. 20.

On Oct. 19, Goldman Sachs reported profit that beat analysts' estimates and said the cost of flawed mortgages and new capital rules won't be significant.

Revenue from trading fixed-income, currencies, and commodities, known as FICC, surpassed results at JPMorgan Chase (JPM), Bank of America (BAC), and Citigroup (C), even after declining 14 percent from the second quarter. The FICC business, Goldman Sachs's biggest source of revenue, fell 37 percent from a year earlier, to $3.77 billion. Equities-trading revenue of $1.86 billion climbed 53 percent from the previous quarter, which included losses on derivatives.

The results demonstrate a shift in how Goldman Sachs makes money as the firm derived 69 percent of revenue from fixed-income and equities trading in the first nine months of the year, compared with 77 percent a year earlier.

Revenue from investment banking, which includes fees for advice on takeovers as well as underwriting stock and bond offerings, surged to $1.12 billion in the quarter, up 22 percent from the previous quarter, and 24 percent from a year earlier.

The firm's advisory revenue increased to $496 million in the quarter, from $472 million in the prior quarter, and $325 million in the year-earlier period. Revenue from debt underwriting rose to $335 million, from $223 million in the prior quarter, while equity-underwriting revenue gained to $288 million, from $222 million in the second quarter.

In a note, Chen said that revenue "fared better than we'd hoped in a quarter marked by weaker client activity levels." He said current market conditions "appear to have improved and capital levels remain robust and growing" for the Goldman Sachs franchise.

"At current valuations, we don't believe GS shares are discounting much in the way of book value growth or Goldman's ability to maintain best-in-class returns," Chen said.

The analyst maintained EPS estimates at $14.45 for 2010 and $19.00 for 2011, as he remains "conservative" with respect to his year-end revenue outlook for the company.

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