EBay shares fall on growth concerns

NEW YORK (Reuters) - Shares of eBay Inc (EBAY.O) fell about 6 percent on Thursday on investor concern about weakening growth prospects for the online auction service.

EBay stock was down $2.45 to $38.15 despite share price target increases by several analysts after the company posted earnings and revenue that beat analyst estimates late on Wednesday.

But some analysts voiced concerns about eBay's growth prospects and others noted the company's promise to step up investments, potentially hurting margins in the future.

Deutsche Bank cut its eBay rating to "sell" from "hold," saying eBay's better-than-expected numbers were mainly thanks to foreign exchange and tax-related items and its operating profit missed Deutsche Bank's estimate.

"We think eBay is facing a worst-case scenario in its business," Deutsche Bank analyst Jeetil Patel said in a note to clients. "We think that eBay's core business is deteriorating to the point of pressuring volumes due to higher ad costs, less user loyalty, which in turn could affect revenue and profit growth beginning in the next several quarters."

Patel said eBay's transaction volumes, which rose 2 percent from a year ago, have the potential to decline in the next one to two quarters.

Patel said he was keeping his $33 price target for eBay shares even as at least six other brokerages raised their price targets for the stock.

Excluding items such as a large write-off for its Skype acquisition, eBay posted an adjusted profit of 41 cents per diluted share compared with average analyst estimates of 33 cents per share, according to Reuters Estimates.

Third-quarter revenue rose 30 percent to $1.89 billion, also topping Wall Street forecasts.