eBay resumes decline on PayPal, guidance concerns

NEW YORK (AP) -- EBay's stock dropped 4 percent on Monday as investors continued to fret over issues facing its PayPal unit, and its financial forecast.

THE SPARK: Jordan Rohan of Stifel Nicolaus listed a series of questions for management regarding PayPal. Concern over new fees that Visa and MasterCard plan to start charging has been hurting eBay stock in recent weeks, and Rohan said in a note to clients that he'd like details on how these fees will impact the profit margin on PayPal transactions.

The analyst also questioned why PayPal has only 5 percent of the mobile payments business, and said he would like to get an update on consumer use of PayPal at check outs, and what incentives the company will offer to lure customers to use the service at retail stores. He also wants an update on the deal announced in August with Discover to bring PayPal to enable merchants to accept PayPal easily.

THE ANALYSIS: Rohan said the key to eBay's analyst day — which will be held on Thursday — is whether the company gives a guidance specific enough to beat investors' expectations. He said that eBay management is too smart to provide high margin targets and instead will probably give an outlook that is "just enough to keep shares steady while showing solid growth and market share gains in both marketplaces and payments."

He suggested that after the analyst day, investors will be comfortable with eBay's current valuation and be open to giving the San Jose, Calif. company some wiggle room so that it can make investments for the future.

Rohan maintained a "Buy" rating and $63 price target.

SHARE ACTION: Shares of eBay Inc. feel $1.86, or 3.5 percent, to $51.41 in afternoon trading. The stock has struggled since its recent peak on Feb. 1 at $57.26.