Summary:
- eBay (NASDAQ:EBAY) traded 8% higher on Tuesday morning, after an activist investor floated the idea of splitting the company into smaller firms.
- Our analysis is that while the stock has made an important bottom, there may be better opportunities to take a position in the near future.
Elliott Management, an investment manager that owns 4% of eBay, recommended splitting the e-commerce giant into smaller firms to maximize shareholder value. Its “Enhance eBay Plan” includes spinning off ticket exchange StubHub, online classified properties, and other reforms.
In a letter to eBay’s board, Elliot said, “Significant underperformance occurred despite strong end-market performance. As the broader internet universe has flourished, especially e-commerce peers, eBay’s stock has floundered.” Elliott believes its plan would double the share price.
Our analysis of the market cycles for EBAY is that the stock is in the rising phase of its current cycle. We see $36 as resistance, with a pullback likely in the near term. While the stock has been in a negative pattern, indications are it has made an important bottom, which was confirmed by today’s “breakaway gap”. As such, we expect minor pullbacks, and then higher prices in the spring/summer.
For more from Slim, or to learn about cycle analysis, check out the askSlim Market Week show every Friday on our YouTube channel.