We've all heard the reasons not to own Ebay. They go something like this:
"The stock is a fallen angel."
"The company has terrible management."
"The Skype acquisition is terrible."
"The company was founded by a French kid to sell his Pez dispensers."
"I got ripped off and they didn't even respond to my email."
...etc...
I am not here to refute any of the bad things that people say about EBay. They are all true, but you still need to own the stock.
The reality is that this stock is not a tech stock (and will not fall when they do) or even a true internet stock. Rather, it is the de facto tool that everyone in America and now worldwide uses to pawn their junk off and to rip each other off. The business for people to sell their junk and to rip each other off just keeps growing day after day, month after month, year after year, and is only picking up steam as it gets bigger. You may not like it (I don't), but arguably it is probably much less harmful to society than tobacco and many people who abhor to tobacco have made a fortune with it.
So forget Skype, even forget Paypal and StubHub. These businesses are poor. The core business is growing.
Last night, the company reported great earnings. Most importantly, it now expects 2007 revenue of $7.6 billion to $7.65 billion, compared with its previous forecast of $7.3 billion to $7.45 billion. It traded over $42 in the after market. The company is generating cash hand over fist.
This morning, some zit-face at Deutschebank saw an opportunity to make a name for himself. He came out with a $33 price target and said - "We think eBay is facing a worst case scenario in its business, due to 2% transaction volume growth (and potentially declining soon), user dis-engagement, higher ad costs, declining purchase frequency, rising seller costs and operating margin pressures."
Folks, there are risks to everything but this is all hogwash.
You have an opportunity to buy here under $38. I suggest that you take it.
Related Articles:
Windorphins, eBay, and Me by Mass Market Tech - Aug 06, 2007
EBay's Skype Writedown shows the Importance of Sticking to Your Industry by JRodgers - Oct 02, 2007.
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