Shares of eBay (NASDAQ: EBAY) jumped Wednesday, after analysts at Morgan Stanley 'double upgraded' the stock on expectations that a transition away from PayPal (NYSE: PYPL) will give the company's numbers a boost.
Analysts at the investment bank raised their rating on eBay to overweight all the way from underweight and hiked their price target to $58 a share from $36. Morgan Stanley's new price target represents a 42.8% upside from Tuesday's close. EBay's stock is up 7.6% this year.
"We expect EBAY to start intermediating its own payments (pulling away from PayPal) in '18 as management stated on its 4Q:17 conference call, with a planned full transition in mid-2020." Brian Nowak, an analyst at Morgan Stanley, said in a note to clients. "We are bullish about this initiative as we've seen other leading platforms … observe higher user conversion/spend from."
EBay and PayPal were part of the same company until 2015, when they were split into independent standalone businesses. Earlier this year, eBay announced it would use Adyen to process its sales.
Nowak said eBay's move away from PayPal should improve the company's ability to grow buyers and gross merchandise value, as well as increase earnings before interest and taxes (EBIT) by 20% over the next three years.
It will also lead to a 52% increase in gross payment margin, he said.
Shares in eBay gained $1.47, or 3.6%, Wednesday to $42.08.
