The Razor’s Edge
2-Year Price History
Recent Price
(4/24 4:00PM)
+1.0%
$16.78
52-Week Price
$9.91 – $32.10
Market Capitalization
$21.4 Billion
Most Recent Dividend
$0.00
About eBay, Inc.
eBay, Incorporated is considered to operate in the Services
sector. They specifically operate in the Catalog/Mail Order Houses
business segment contained within the Retail industry.
The Company provides online marketplaces for the sale of goods and services as well as other online commerce, or ecommerce, platforms, online payments services and online communications offerings to a diverse community of individuals and businesses.
Ockham’s Rating
At Ockham Research, we believe that there is extremely useful information to be gleaned from historical evidence. When a stock is out of line with historical norms it could definitely be a signal that it is overvalued or undervalued. But as proponents of the Efficient Market Hypothesis will tell you, the market is never wrong about stock prices because everything that can be known about a stock has already been priced in. However, in extreme cases, such as the Tech bubble in the early 2000’s or more recently the credit crisis demonstrates there are certainly times where historical evidence can be misleading. Episodes such as this do prove that times of great market correction either positive or negative can be driven by factors outside of fundamentals.
In general, when sectors, in this case the Consumer Services sector, have underperformed the market we often tend to be more hesitant to recommend stocks in that sector. However, even though the stocks in Consumer Services have appreciated 1.0% in the last six months, we believe that EBAY is not quite due for an upgrade. Please see the full report of underlying research for more of our rationale of keeping a rating of Greatly Undervalued for at least another week.
Looking at the basics, the price of EBAY rose from $14.39 as of 04/18/2009 to a price of $16.78 as of 04/25/2009. This increase does reduce the attractiveness of EBAY, but an increase of 16.61% is not substantial enough to warrant a downgrade at this time.
Also, there have been no meaningful adjustments in earnings expectations to report in the last week.
EBAY Stock Evaluation
In this week’s report, we are reiterating our Greatly Undervalued rating on EBAY. In the last week there has been no revisions made to earnings expectations, but our valuation has obviously been influenced by the increase in price of 16.61%. While that price increase has not caused a downgrade this week, we will continue to closely monitor the fundamentals in case a future change in rating is warranted. The complete fundamental analysis of EBAY follows below.
EBAY Revenue
As a value investing shop, we are interested in seeing how EBAY’s revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock’s current underlying value. Using this method, we have established a high range for Price to Sales of 16.88x and the low end of the range at 8.21x.
With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for EBAY of 2.22x is well below its normal historic Price to Sales levels. At a price of $16.78, EBAY is 83% below where we would expect to see it. Clearly, this stock looks undervalued compared to historical levels, at least on a Price to Sales basis. This will positively affect our analysis because it is rare to find a stock this far below historical norms, and we would expect some price appreciation to bring this metric back towards a more normal range.
EBAY Cash Earnings
Looking at EBAY specifically in their Cash Earnings capabilities, Ockham views EBAY as significantly below its historical average multiple of Cash Earnings. Looking at the last 10 years we can get a good understanding of what investors have grown to expect from EBAY. For example, EBAY’s Cash Earnings ratio per share has fluctuated between 32.83 and 58.83 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where EBAY is with respect to prior business periods.
So with EBAY’s current price (latest close of $16.78) and most recent level of Cash Earnings reported, we see significant opportunity from a value perspective. At its current price level, EBAY is 82% below its average level of Price to Cash Earnings on a historical basis. This means that investors were willing to pay for a much higher stock price than currently for the same level of Cash in the past, on a relative basis. There are a couple of important things to remember, however. First, value doesn’t exist in a vacuum. So if the market doesn’t recognize this value, even a great disparity in Price to Cash Earnings cannot force an immediate stock price reaction. Second, patience is key when looking at securities that have reached these levels of Price to Cash Earnings versus their historical norms. So be patient with EBAY.
EBAY Dividends
A strong dividend payment history is looked upon as a favorable characteristic on a company’s future and potentially can receive a positive Ockham rating. That being said, we don’t require dividend payments for company’s whose management has elected to forgo them entirely. As far as our investing methodology goes, it is not necessary to pay a dividend in order to get a favorable rating, so as for right now EBAY gets a neutral rating for the dividend portion of the model. As you can see, we are not receiving historical dividend information from our data provider on EBAY at this time.
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The latest TV Media Discussion
“…His name, the kiss guy, gene simmons, he says buy american. Back to you guys. >> brian: I think the president, there we go, I don’t know, a chrysler 300. >> dagen: yeah, they sold it on EBAY, check how much it was. We want to confirm some news we brought you last hour, the david moffitt, the former ceo at freddie mac, he was there just a matter of months, put in after …”
“…It is one that i’m always clamoring about. American consumers are definitely feeling better, maybe even good about we’ve got surprisingly resilient earnings coming from apple and EBAY. Everyone is still buying ipods and iphones. Thought we were in a recession? Housing mortgage applications surging since december. Credit markets. …”
“…A leadership group on the upside, certainly on a performance basis as well as where are we in terms of the picture for sector? >> also, you saw EBAY yesterday, the fact it’s continuing that health care is the best performing sector. X out big pharma, health care is up 2%. …”
“…>> fighting real resistance @a look at the eternals, down 2-1. EBAY is a fascinating story, up 13%. That can’t be the only explanation for the huge pop. Talking to traders, i’ll share their observations. Obviously, a short squeeze could be in play. Korean regulatorpproved the …”
“…Of apple. Microsoft after the close. Because they didn’t give guidance, the number could be a wildcard. Stay tuned for that. EBAY, another focus for the markets. Beat the street view today thanks to cost cutting. And solid growth sending the …”
“…To pour in, liz. Hard to keep up. >> that’s what we’re here for. Everything regarding the tech stocks at the nasdaq. We have EBAY and apple after the bell. There are a bump of names you’re looking at. >> we have to talk about apple. Good news is apple unable to …”
“…Apple up 3%. Received an upgreat today with a new price target of 165. They, of course, great margins, great earnings. EBAY, they’re up almost 14%. They beat estimates by 5 cents. I’ve been trying to root around to get some answers. They got an upgrade from colin stewart. Career regulator approved that g …”
“…>> never does with the >> just some cash. >> quick test time for you. >> I like microsoft. We don’t have a tell yet. But late in the day, we might. Just like we did yesterday in EBAY right now, i’m neutral on these >> go to the poll today. We asked viewers yesterday if they’re buying microsoft ahead of the earnings today. 58% of you out there said, not …”
“…Appreciate you taking the time. Thank you, bob, as well. >>> let’s check in on the nasdaq on the tech side since we are awaiting the earnings. Brian shactman is there for us. Brian, apple, EBAY, those are the two that obviously did better than expected. And as we talked about with jim goldman you have microsoft and amazon after the close. What do you see already this >> it’s very interesting. With amazon, it’s a broader base retail picture. Litmus test here, even more so than EBAY. People really want to see what’s going on with wentkendell and their there’s a good buzz around the when it comes to microsoft, it’s …”
“…And guide dance, if it comes down to that, both look very good towards the rest of this no question. And gene, again, i’m reading through your notes. It appears that you can’t really get excited about EBAY until you see meaningful changes to the marketplace, platform. What do you mean by meaningful? >> go on EBAY and search for a product. You’re looking for. Amazon is really easy to find. They’re going to make some of those changes. Until the average person realizes that it’s easy to find what you’re looking for on EBAY, I think the shares are going to be range bound. >> fair enough. Gene munster, jim "gigabyte" >>> up next, breaking news on …”
“…At exceptionally well. Early reviews have been strong. Not to say this is going to tap into the apple market as an xaple. None the less, there is some very positive buzz surrounding microsoft right now. Amazon, you look at EBAY’s numbers ytd. That bodes well for amazon which has already basically eclipsed EBAY as far as the online maace of choice for so many consumers. That company continues to do we’re seeing upgrades now. Citi upgraded amazon just a couple of days ago because this company is really firing so …”
“…Numbers are pathetically too it’s getting more difficult to get to the guidance. Numbers are going to be better for june. New products are coming. Apple is going to be in the favor for the next six months. As far as EBAY, that one is obviously getting a bump up. That one still a little bit they’ve got changes to their marketplace coming in june. That’s more of a riskier bet. >> just the other day, in egypt …”
“…Let’s go in with piper jaffray and the jim goldman silicon valley bureau chief. What do you do searhere with apple and EBAY? We’re down now for the dow. Up barely for the nasdaq. Everyone seems to like tech right now. >> exactly. Yeah, you do. …”
“…>>> you’re watching cnbc’s "squawk on the street," live from the financial capital of >> tech earnings continues. Apple and EBAY topping wall street targets. EBAY did say profits fell. Still though, better than apple did say profits rose, why? Iphones and iipods. …”
“…Handled well, so the government has all the motivation to try to avoid that. Alexis: let’s count down the seven early movers and charles payne. Good morning, charles. Charles: good morning, we’ve got to start with EBAY. Fantastic earnings, 39 cents revenue both of them beat. And what’s interesting a lot came from pay pal, the core business 90 delinquentsy up. …”
“…They’re relatively high. Is that correct or not? Is that the canary in the coal mine? To wait and see. Mark haines, back to you. >> rick santelli, thank you. Results of apple and EBAY, sparking hopes the economy could be stablizing. Our next guests are both bullish here to tell us why and what …”
“…Marriott is also opening a little bit to the upside. They beat on their numbers as and apple should be dominating the discussion over there. >> interesting, bob. Apple is solid, but EBAY really a big story, too. Up .2 of 1%, under four points. What else can you say about incredible margins. Ipod to iphone doing extremely well, especially when you look what do you need to know? Rbc capital upgrading it to $165 price target. EBAY up almost 10%. Just an unbelievable pop. Paypal is a real strength for what are they going to do with skype? Forward. Let’s move the conversation …”
“…Six years, you’ve got to watch also of importance, the company reiterated that steve jobs will return when he said he was going to in two months, which is almost as important as the EBAY also seeing nice healthy gains today, thanks to cost cuts and solid growth that led its numbers to beat the street’s expectations, other numbers that came out today, companies reporting earnings, ship related …”
“…>>> plus, well, speaking of risk in the market, is it time to up your exposure to small caps? That’s your edge. And we’ve got more good news from tech land this morning. Apple, EBAY, both ahead of expectations, both helping futures point higher. We’re going to have a tech check after the close today. …”
“…Listen, did the america consumers day. Paulson is listening to music and making calls on his iphone, apple litting inghitting it out of the $165 a share. EBAY, even bigger pop today. Want to point out paypal, a real strength for them. Amazon.Com and microsoft, want to point out amazon upgraded to …”
“…Let’s start with connell. Connell: the ups outlook was not as good as expected. We also have the technology news out last night. EBAY and apple. So those kind of fighting against each other and for the time being at least looks like technology would lead the market higher today. We will see how that ends up you mentioned some earnings were still breaking. Etwee the railroad company …”
“…Report on jobs. >>> a late day selloff for the market. But apple and EBAY provide an after-hours spark. >> future pc, have they figured out to fix our issues? Have they figured out to make us as stable as the mac? >> future pc just froze. >> that answers that question. …”
“…You can see it right here behind me $126 a share. So that’s well up from the 121.51 where it closed. Now the other stock we’re watching on the technology front has to be EBAY. If we can flip this over to an EBAY bid ask in the premarket. The EBAY stock price is also to the upside. 15.72 a share. 14.78 was the close. Nasdaq futures outperforming the dow and s&p and pointing the higher open in techland this …”
“…The numbers are relatively they’re registering positive, positive numbers a market like china. Neil: people cheap food or pretty well. EBAY, that would do well in >> EBAY is actually hurting. The numbers were pretty neil: but better than >> better than expected but you’re talking about revenues that, were down 10% in the base business and auctions falling off a EBAY is clearly losing I don’t think that is representative where we are in the economy. Neil: but nevertheless, when you sell, million ipods you sell, 11 million ipods >> that was great. >> apple numbers are absolutely stellar. …”
“…Profits rose at mcdonald’s so americans are still eating. Eating big macs. Upgrading their ipods, that is still happening too. EBAY, anything you sell on that could be actually a counter trend, right? If things are lousy you’re putting up all the family heirlooms on EBAY. But I digress. Signs the economy may be starting to turn around? Let’s ask all-stars, jonathan hoenig, howard rosencrans, adam shapiro. Glad to see him here and wicked, elizabeth mcdonald. Wicked, what is going on >> you know, this idea of a green shoots economy and fast-food comes and EBAY doing well, I never bought I never bought that, it is up there with the subprime crisis is contained or that the u.S. Economy has decoupled from the rest of i’m sorry, I don’t buy it. …”
“…Gentleman from toledo just said. These are so beaten down that even when they report numbers, when they report their earnings and they don’t look special, the stocks bauns because in this case EBAY has a very good balance sheet, a lot of cash. They spin off skype. The core business is okay. The paypal is worth I think probably two thirds of what the company’s selling for. So again, I don’t want to sound like a gunner because I don’t like all the market here. But in EBAY acting well off a just okay quarter tells me there’s more up side. So I like EBAY. I think it’s a very interesting oh, man. They’re giving me the hook for the top of the show. I say bye-bye garlic. …”
“…>> ba-ba-ba-boo-yah, jim. >> stuttering boo-yah. Always welcome on the show. >> my name’s boris. I’m from cleveland, ohio. My question’s about EBAY. Last week they announced that skype’s going to be — they’re going to spin it off in an ipo. Do you think the skok can trade to 25 or 30 like it was a year ago? >> it just reported. And to me it’s very interesting. …”
“…Just close your eyes and jump and if they’ve beaten the stock once, you’ve just got to say to yourself I missed it and i’ll wait for the next trade. >> he also said interestingly there are better places out there to put your money these days like EBAY which we’re seeing move higher in the what do you think of that right now? >> they’re a little bit apples and oranges. But the valuation, the gap is so …”
“…About the retail environment starting to weaken, et cetera. I mean, the stock’s up 50%. So if he thinks it’s going to go up another 50% from here this for me i’d rather own EBAY at up 6%, thinking it can be up another 30% to 40% this year, which I think is totally valid. I don’t think we’re — we’re not disagreeing on amazon being a great company over the next two or three years but from here I …”
“…And you’ve got a company trading at a 30 multiple on top of that with revenue growth of only about 20%. So to me there’s a lot better places to put your money. EBAY, which reported after the close today, which we have an investment in, by comparison, they’re trading at 10 times. The stock’s up about 6% this I think there are a lot better places to put your money than to try to chase this and hope the …”
“…Network effects. All kinds of good dynamic. >> we’ll talk about later on down the line, what will help the company, g-market. In south korea, vary version of EBAY. It is g-market. EBAY wants to snap up all of it. Another big market to go into. That won’t help? Cody: I don’t think so. EBAY has burned out their business model on business >> there is nobody else out there. Cody: a google is coming through. Off market, off grid, mainstream internet. People are connecting without EBAY. Facebook, et cetera, all competition for EBAY. Folks. The latest on the death of freddie mac’s acting cfo, david kellermann. …”
“…Kentucky fried chicken is not selling cheaper kickens. Rebecca: say good-bye to the eric says, only if it is grilled, not fried. Let’s hit on EBAY, folks. E bay — lower quarterly nest profit sales and profit margins but beating expectations. Here we go again. In after-hours, boy, look at the stock, guys. Up 7 1/2%. Cody: best thing out EBAY call, fundamentals much EBAY itself not good. Down 6% year-over-year, on the market itself. Rebecca: yeah. Cody: big thing skype. …”
“…Actually. >> kind of scares me. >> it’s a family show. We’ve got to be careful. >> it’s not the cream of the we’re waiting for amazon. Amazon’s reacting as well in the after market if I take a look at that stock as well. But EBAY, this is the next tier you look at the financials. We talked about jpmorgan and goldman sachs and then you started to move down a few tears tiers when you look at the rest same thing true with EBAY. EBAY you’re just looking to see what their projections are. I think the real numbers are going to come from amazon. >> if you want to take a shot on the EBAY of latin america, mercado libre. >> roll the r a little bit more. >> libre. How am I doing? >> that was one of my favorite >> interesting name to buy here, different from EBAY, a very high >> let’s move on because story in the session, it proved to be a leadership group today but take a look at the market itself, selling off sharply in the final hour. And again it was the banks that led the way lower. …”
“…>> I don’t know. >> the stock is actually heading back — up maybe 2% now. >> let’s move on to the other after-hours story that we’re also in tech land. EBAY being both sales and profits of shares are trading up in the after-hours session. So this seems to be more good news on top of technology. And of course today the nasdaq, the only index managing to close but do you like EBAY here? >> the quarter was very the revenue number at EBAY was I mean, the price action we’ve seen has been interesting leading up to these earnings. Again, much like apple I can’t get that — I can’t get that >> aroused? >> that’s good to know. …”
“…There are a lot more today that take a much more immediate you are again I s we’re talking about the economy, and your job and whether the latest earnings from EBAY and apple and yum! Brands give us any indication of whether the sun, trying to poke through all these clouds. All right, wrap it you, eric, markets today. Eric: both sides are …”
“…Midpoint of the he you range, $ $1.8 much better than expected as far as the company’s first quarter sol lead guidance for this company for its second quarter. What does this mean for amazon? That company reports tomorrow. If there’s good news at EBAY, there could be significantly good news for amazon. >> jim goldman, shares of …”
“…What some on the street were communications revenue, lower than what people are looking at. 21% group, the home of skype. EBAY plans to spend off into its own ipo next year. Active user growth, worse than expected as far as EBAY is concerned. Look at the company’s second quarter guidance, 34 to 36 cents is right in line. Street was looking for 35 cents. …”
“…Watching, the market place transaction revenue, we expected a dip there but it wasn’t as bad as analysts were projecting. Down 18%. Citi was looking for a decline of 22%. EBAY performing better than expected there. The good news for this company comes from its papal and payments unit. The payment side of the business up 11%, almost twice as good as …”
“…>> we’ll leave it there. Rich peterson. Thanks for joining us. Kick van dike, thank you as >>> EBAY out with breaking news. Cnbc silicon valley bureau chief breaking down the numbers. >> let’s go through the numbers quickly here. See EBAY in after market. 39 cents beats by 6 pennies what wall street was anticipated. $2.02 billion versus $1.946 billion that the street was …”
“…Inventory destocking is kind of over and we’re back to more of a level playing field there. I want to ask you broad trends in a moment, dirk. What do you think about the numbers coming out of EBAY in terms of what they tell us about better than expected? E barks shares trading up, 39 cents a share, versus an …”