By Dan Gallagher

EBay Inc. is seeing its core online auction business show signs of improvement after making numerous changes over the past two years, in hopes of beefing up its performance, according to a pair of brokerage reports Monday.

Shares of eBay (EBAY) closed down 17 cents, or 1%, at $16.17 on Monday.

Online auctions still constitute a majority of eBay's total revenue, though the maturing business has been in decline for the last few quarters. EBay is banking heavily on stronger growth in its PayPal business, but the company has also been investing in changes to the auctions side, as the business has come under greater competitive pressure from rivals such as Amazon.com (AMZN).

The auctions business saw its worst period in the first quarter. Revenue fell 18%, to $1.22 billion. Gross merchandise volume - or the total value of goods listed over the marketplace - slid by 16% during the quarter.

"Our channel checks show that the pace of GMV decline in Marketplaces likely bottomed out in 1Q," Youssef Squali of Jefferies & Co. wrote in a report Monday.

The analyst stopped short of calling a turnaround for the business, but noted that with continued growth in the payments business, "2010 estimates could prove too conservative."

In his own note to clients, Sandeep Aggarwal of Collins Stewart said the changes made by the company to the auctions business "are beginning to bear fruit." He notes improved search results and an improved fee-calculation process.

"In our view, the changes are helping eBay in listing conversion and GMV per listing going up," he wrote. "We also believe that addressing and correcting the structural problems in the Marketplaces business (e.g. legacy auction bias) is a key step towards unlocking value in the stock."

Several analysts believe eBay to be under-valued. Though the stock is up 17% for the year, eBay shares trade at only 11 times estimated earnings for the next four quarters. Amazon, by contrast, trades around 50 times estimated earnings.

Squali of Jefferies says used car sales may see improvement in the second quarter. He also said sellers have reported improved outreach efforts by eBay's management, and the company's stronger emphasis on fixed-price listings has improved the experience for users.

"We view the stock as undervalued on both relative and sum-of-the-parts bases," wrote Squali, who rates the stock as a buy, with a $23 price target.

-Dan Gallagher; 415-439-6400; AskNewswires@dowjones.com