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Evercore Ups to Buy, MasterCard Increase Not Fatal
http://blogs.barrons.com/techtraderdaily/2013/03/14/ebay-eve...


Shares of eBay (EBAY) are up $1.53, or 3%, at $52.51, after Evercore Partners’s Ken Sena this morning raised his rating on the shares to Overweight from Equal Weight, and a $64 price target, up from $54, urging investors to look past Monday’s somewhat disappointing February data from ChannelAdvisor, and worrisome comments yesterday from MasterCard‘s (MA) head of North America at a conference.

eBay shares fell 4% yesterday following those remarks from MasterCard’s Chris McWilton at a Credit Suisse conference, writes Sena, in which McWilton said fee increases will pertain to eBay’s PayPal unit:

All digital wallet transactions considered to be veiling transaction data from either the payment source or the merchant are subject. PayPal falls in this category. Other digital wallet transactions where payment data is stored online by the merchant (e.g., Amazon.com (AMZN)) or passed through between transaction parties (e.g., Visa’s (VISA) V.Me) are not surcharged. MasterCard claims the objective of this fee increase is to address poorer network branding, data cataloging, and fee transparency.

Sena, however, thinks the hit to eBay should be “modest” as a result:

We estimate the impact of the MasterCard fee increase to be less than 50 bps of PayPal margin, even assuming a full years’ worth of pro forma impact at a 50% increase. This assumes that 33% of PayPal’s transaction expenses are related to MasterCard, which is roughly supported by market share data from The Nilson Report. This pegs about $600 million in MasterCard-related transaction expenses which spread across the issuer, the merchant acquirer, and MasterCard. Of this amount, we estimate that only 10% gets directed to the MasterCard network, or roughly $60 million. We show below that after assigning a range of increases to this network fee, the impact is very modest. Again, we remind investors that PayPal had knowledge of this increase at the time of its January 16th guidance update.

Sena is modeling eBay revenue of $16.6 billion in revenue and $2.88 per share in profit this year, higher than the consensus estimate for $16.35 billion and $2.75 pe share.
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