Thursday, January 25, 2007

The Day After - Investor Regrets?

Wow! EBay’s stock had a great run after hours yesterday. It is still a long way from the $44 of last January but a little good news deserves some momentum.

The problem is, I think many of the investors who bought eBay on the way up will feel like the person who partied too much one night and woke up next to someone they didn’t know or remember the next morning. Can you say awkward? I still don’t think eBay is a growth company (in their current state) so the stock will still trade in the $28 – 33 range for most of the year. So I don’t see investors asking for eBay’s number.

The numbers were nice but nothing to write home about. The share buyback had a big impact on the EPS, the value of the dollar helped, Sony and Nintendo helped and PayPal helped in a big way. I think it is entirely too early to tell if the ship has been righted. I don’t think Sellers can pay much more so where is the profit going to come from. Skype is a nice idea but they missed their revenue target by roughly $8 mil (which is actually a good thing or eBay would have had to pay more money to the founders). PayPal continues to be the shining light but Google isn’t going away and the Marketplace business is dependent on International growth, which will slow. I can’t see this stock as a buy and hold but I am not an Analyst. I base my opinion on my gut.

Congrats eBay on a Great Quarter! I’ll call you.

Update: I found some analysts who agree with me. Follow this link to an article from Seeking Alpha that discusses their positions. The analysts are Safa Rashtchy of Piper Jaffrey (a noted eBay Bear) Jeetel Patel of Deutsche Bank (A great Texas Hold em' player) and Jordan Rohan of RBC Capital.

My good buddy Bob Peck of Bear Stearns has a rosier outlook on eBay though he does hedge his comment slightly “We applaud management's navigation and remain optimistic, but we also underscore that many challenges remain.”