Analyzing Ebay (EBAY)

Photo of Douglas A. McIntyre
By Douglas A. McIntyre Published
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

By Yaser Anwar, CSC of Equity Investment Ideas

  • Ebay’s size and business model enables them to generate considerable profits. Over the past four years, Ebay has generated 59% growth in FcF each year, which Ebay has used to make acquisitions, most notably Skype. Ebay’s acquisition & significant investment in international operations, especially in China, and tech, have led to a notable margin compression in 06.
  • As of Ebay’s last Q, they had 211.9 million confirmed registered users, up from 168.1 million a year ago and 79.8 million active users vs 68 million last year, which accounted for 488.3 million non-store listings vs 407 million last year (05).
  • Revenue from Marketplaces grew 22.3% to $1.05 billion due to good performance in key geographies and strong results from Shopping.com. Revenue from PayPal grew 41.7% to $350 million due to the increased penetration on eBay and growth witnessed in its Merchant Services business.
    Looking to Network with People in the Financial Industry
    | Connect with me on Linked In or email me yaser AT yaseranwar.com |
  • Ebay expects to generate net sales in the range of $5.87 billion to $5.93 billion in 06, up about 28%-30% from 05, including $1.62 billion to $1.68 billion in Q4 FY06. The company anticipates EPS of $0.75 to $0.76 in FY06. The company also expects that FY07 organic consolidated net sales growth would be in the range of 17.0% to 21.0%.
  • According to Street estimates weekly post-holiday sales were up 44%, (thanks to the gift season) and sellers listed 16.6 million non-store items on the US site last week. Listings were also aided by fixed price promotion.
  • Investors need to understand that even though Ebay is a well established leader in the Internet segment with a business model that has low costs and a stellar balance sheet, the Web is a rapidly changing environment & Ebay faces notable competition. This has led Ebay to make acquisitions which have cost a lot more, at least the way Wall St. views it, than they should have.
  • Hence management’s strategic decisions have come under scrutiny and exposed investors to risks of declining conversion rates, slower than-expected listings growth & further compression of operating margins (ebay’s OM contracted 886 basis points to 23.4% in 3rd Q of 06 due to the inclusion of the Skype business, investment in site operations capacity & high cost for consumer protection programs).
  • http://www.equityinvestmentideas.blogspot.com/

    Photo of Douglas A. McIntyre
    About the Author Douglas A. McIntyre →

    Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

    McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

    His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

    A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

    TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

    McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

    Our $500K AI Portfolio

    See us invest in our favorite AI stock ideas for free

    Our Investment Portfolio

    Continue Reading

    Top Gaining Stocks

    CBOE Vol: 1,568,143
    PSKY Vol: 12,285,993
    STX Vol: 7,378,346
    ORCL Vol: 26,317,675
    DDOG Vol: 6,247,779

    Top Losing Stocks

    LKQ
    LKQ Vol: 4,367,433
    CLX Vol: 13,260,523
    SYK Vol: 4,519,455
    MHK Vol: 1,859,865
    AMGN Vol: 3,818,618