Ebay - 2007/02/21 00:54
OK i just spent 60 minutes writing about ebay and how it increased 13 percent over the last 3 weks and after posting i realized it deleted everything i wrote because i wasnt signed in.
sorry, but in short from wrote take a look at ebay and tell me what you think.
I would type it all over again but it would take two hours so get back at me about it, thanks Kris
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admin
Re:Ebay - 2007/02/21 03:32
Hey Kris sorry for your troubles, I have since updated the log out time to 45 minutes from the 15 mins, moral of the story, don’t rely on the website. I have found this out the hard way especially when I write on my blog, http://www.thefinancialwhiz.com, sometimes I might lose my Internet connection and lose everything I was working on.
Well onto Ebay, low overhead, a unique product, and the biggest player in the online auction business. Just to think a couple years ago the person who started the website coded it in just a weekend.
The positives:
The company is trading at a forward PEG ratio of just over 1.00, which basically means that you are paying $1 for every $1 of growth, which in the stock market is low, compared to the S&P 500 which is a much higher ratio, almost around 2.00.
They made a great acquisition, I believe two years ago, of Skype, which has been a huge driver of growth for the company. The VOIP market is huge, especially with the big phone companies bringing broadband/DSL speed to the majority of houses in the United States and other carriers around the world also have similar plans. Skype is different from Vonage, because while they have a landline feature, which you pay a monthly fee to use, but they also have a free online based calling program where users with microphones can talk with anyone around the world for free. This has been the main reason for the rise in the value of Skype since the acquisition, because while the majority of the users start out using the free aspect, they may upgrade to the premium (landline) version once they become more comfortable with the quality of the service.
Another positive is the company is 64% held by institutions and 20% by insiders. This means that the research that these big institutions pay big bucks to get has made them confident to own as much as 64% of the company.
They have announced a share buyback of roughly $2 billion, which is about 4.2% of the current shares outstanding. This means that even if Ebay stopped growing, they would still show an earnings increase of 4.2% because now there are less shares outstanding to divide the earnings by. I would suggest that you take a look at the progress of the share buyback plan as a further investigation.
They have no debt and have roughly $3 billion in cash on the books, which could further potentially be used to buyback more shares or to pay a dividend.
The negatives:
The biggest negative thus far is the fact that they could not establish a China presence, let alone an Asian presence. Foreign companies are seen in a different light in Asia and Ebay just was on the wrong end of that and ended up closing down the project in China. Since China represents 1/6 of the world population, this was seen as a huge blow to the further growth of Ebay. They currently have no further plans to get back into the Chinese market due to the fact that they might alienate the population. A competitor that you might want to look at is GMKT, G-Market, which operates in the South Korean market, which may be able to expand into the rest of Asia. Its growth is almost 50% per year and this is just one of the new Asian companies that are able to experience this type of hyper growth.
Unlike Google, Ebay has not made it a priority to innovate new products and create new services. While they do not directly compete, the fact that Google is able to spend money in Research and Development separates it from the quality of Ebay. Ebay and Google both make outside acquisitions, further fueling addition growth by identifying up and coming products and purchasing the companies, but Google is also experiencing organic growth (internal).
Institutions have been selling the shares that they hold and have decreased their holdings by 4.9% over the past quarter and insiders have been pretty regularly selling shares, but not that much compared to their current holdings. The fact that there have been upgrades in the past month also makes this a bit particular; because it seems that they are saying one thing and doing the opposite.
All in all, I think Ebay is a hold, if not a buy, right now, while there are a lot of benefits, there are some negatives that seriously need to be looked at before we could consider holding this in our portfolio. What are your thoughts?
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KrisJonA
Re:Ebay - 2007/02/22 03:11
In response to the lack of innovation i found the following information fairly interesting. They are keeping up with google and yahoo coming up with a plan to sell television ads in the coming month.There plan is to create an online buying and selling marketplace of television advertising which they are going to launch on March 15th. Companies can communicate (negotiate) with advertising companies who post advertising inventory and vis versa. I think this gives Ebay great growth potential for the second quarter since it is a pretty innovative idea to have a concrete place to to buy and sell television advertsing, which i presume would be like the same format as the regular Ebay website. Also, it may be a good source of future revenue for the company. I found this information at the following link http://publications.mediapost.com/index.cfm?fuseaction=Articles.showArticleHomePage&art_aid=55716
let me know what you think about it. And also, where do you find information about institutions selling their holdings and what insiders are doing??
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