Online e-commerce has weathered the economic storm slightly better than traditional retail. This combined with their much more competitive cost structure, has maintained their profitability.



Collins Stewart analyst Sandeep Aggarwal this morning upped his rating on eBay (EBAY) to Buy from Hold, with a price target of $23. His thesis is that the company is showing signs of a turnaround in its core Marketplace business.

“Though eBay still has a long way to go, the signs we have seen so far are extremely encouraging,” he writes. His case:

The company has improved its search for the best match favoring merchants with higher seller ratings.
It is “dramatically increasing” penetration for free shipping by offering incentives.
Standing behind buyers using PayPal in case of fraud/legitimate returns.
Increasing selection by implementing fee structure changes.
He contends these changes translate to higher listing conversions, growth in gross merchandise value higher than listings growth, higher realized dollar value per listing and more satisfied buyers and sellers.

Aggarwal upped his 2009 EPS estimate by a penny to $1.47. For 2010, he now sees $1.71, up from $1.62.

The Street appears unconvinced: EBAY today is down 24 cents, or 1.3%, to $17.72.

eBay, after the departure of Meg Whitman, who stirred up huge seller resentment through her policies, and somewhat questionable acquisitions [Skype] under new management has caught an upgrade. eBay along with AMZN, is one of the survivors.

I’ve been meaning to have a closer look at this sector for a little while now, but was distracted.