Blodget Thinks eBay Looks Cheap; We Disagree 12 comments
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Over at Clusterstock, Henry Blodget thinks that eBay (EBAY) looks cheap. We thought that we would take the opportunity to have a look at eBay using the Valuecruncher interactive tool to analyze the company.
EBAY Valuation
Our assumptions are revenues of US$9.0 billion in 2008 growing to US$11.5 billion in 2010. We have used a flat EBITDA margin of 37.5% from 2008. We have used a terminal growth rate of 4.8%. We calculated this terminal growth rate based on year three growth of 12.2% dropping to a 4% stable growth rate by year 10. We used a terminal capital expenditure number of US$800 million. We have used a WACC (discount rate) of 11.5%.
See the Valuecruncher's valuation here.
Our analysis incorporates the cash on the eBay balance sheet – Valuecruncher calculates a net debt number. Our analysis also incorporates Skype within the current eBay structure. It is possible that eBay will decide to sell the Skype business (Yahoo (YHOO), Google (GOOG) and Microsoft (MSFT) have been suggested as possible acquirers). There may be a higher value owner of Skype than eBay – but until that situation is clarified we have kept Skype where it is.
Our analysis gives a valuation of US$28.13 which is less than 1% below the current share price of US28.38. We don’t agree with Henry Blodget that EBAY looks cheap. Based on our analysis the current valuation looks about right. Play with our assumptions - what does your analysis say?
Disclosure: none
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This article has 12 comments:
eBay is one of those companies where it's an unbelievable business but the street just doesn't like the stock so they find ways to say that the story is not good. But at some point, their P/E ratio is going to drop to insane levels and people will start to buy it again. Once Wall Street owns this stock, it will rise again because they will make money when it does. But until it gets to that point, the street will find reasons to knock it down.
That said, eBay needs to reignite a culture of innovation inside the company if it ever wants to be a darling of wall street again. They also need to buy back a bunch of stock so they can move the needle in larger amounts. When eBay beats by $0.02, it's the same as when Google beats by $0.20. When Google beats by $0.20, the stock goes up $100, but if eBay beats by $0.02, they sell it off. It doesn't make any sense to me, but that's the point with stocks. It doesn't matter if eBay had the greatest numbers of any company in the world, if the people with the most amount of money don't want the stock to go up, it wont, no matter how good they do.
Recently, a deal was cut with Buy.com and currently "Buy" accounts for about 1 in 25 listings at ebay.
While the terms of the "deal" were not disclosed, ebay admits to a mutually profitable arrangement with Buy and intends to make these arrangements with other mega sellers.
The rumor is that Buy lists for free and that final value fees were cut so that actual or Free shipping could be offered.
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eBay is actively driving out small sellers in order to improve "buyer experience" by having more "real companies" selling items on ebay rather than the average Joe selling out of his garage.
This has sent a wave of anger through the seller community. It's really just a disaster in the making.
First, sellers at ebay are also buyers. So ruining their businesses is hardly a way to install loyalty.
Second, large sellers like Buy also have websites to sell through. Invoices, customer service, everything tells you that buy.com exists when you buy from buy at ebay.
So, in effect, buy.com is using ebay to drive customers to it's website where they can avoid the ebay cut on future sales.
In the short run, ebay makes money. But in the long run buy.com gains a tremendous number of new customers while sales at ebay are flat or decline.
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Second, ebay opens the door for other sites like Ioffer.com and ecrater.com
These sites are growing like crazy as ebay sellers search for other alternatives. It will take time for the shift to occur, but eventually ebay will not be the "go to" site for auctions. Instead, they'll just have a handful of mega sellers selling stuff I can buy anywhere (and often at a better price).
eBay has been putting a positive spin publicly since January 2008 on their implimented changes in an effort of appeasement for the stockmarket and general public, but don't kid yourself, it's a bloodbath over there.
Please read backlog's of previous posts/comments pertaining to eBay/Paypal here at Alpha. And by all means, check other boards.
And yeah, it's really that bad.
Here's a thread on the Amazon seller board posted today:
www.amazonsellercommun...
From these figures it looks as if book buyers are in fact getting an inferior Ebay experience as a result of this, in spite of the Ebay spin. If that policy is extended to other categories than $28 starts to look optimistic, let alone $38.
ebay's day as the only good game in town are over. Such declarations just don't hold true anymore because they simply are not.
Other selling sites are established - some for several years, so they can't be termed "overnight wonders" - and gaining serious rival ground.
As stated above, one such is Ioffer at almost 4.5 MILLION listings -- and growing rapidly -- can no longer be blown off. And ebay's listings are dwindling with even more alarming rapidity. 13.5 - 4 million. Stand that side by side, and we aren't even adding the "other" sites on hand, and the eBay hayday is over.
Unethical fundamental eBay practices will eventually segue into a mediocre site that's peddling what I can nip over to Walmart and pick up. With a much less hassle return policy.
Ebay is causing sellers to leave in droves, with the new policy changes and tens of thousands are upset and will be protesting at Ebay Live 2008, this week.
The changes are idiotic. Sellers can no longer leave negative or neutral feedback, even if a buyer bids, wins your item, ingores your emails and doesn't pay. What right do they have to leave any feedback, if no transaction has taken place? We have sellers, bidding on competitors items and ruining their feedback, just to get a boost, on their own items.
Ebay went in and retroactively turned all neutrals, to negatives. Neutral, means just that, how can ebay call neitral, negative? They swtarted giving new discounts to people with good ratings, but they knock them down first, with the neutral change, so that many can't even meet the requirements, for the discount.
That is not the worst of it. We have thousands and thousands of sellers, who have closed their stores and we KNOW that the listing count should be going down. But, we have uncovered the source of the raised listing counts and I can't see it being anything, but fraud.
The seller BUY or Buy.com was taken on by ebay, right at the time ebay KNEW they were going to lose sellers. They are using buy.com, to pad the listings, to make it look like the count is up, when it really isn't. We have found thousands upon thousands of fake listings, that have no description and you can't even buy them. I found them ending tens of thousands of listings early, saying they are no longer available for sale and then immediately relisting them. Most likely to keep the sell through rate up and then relisting them again, to up the listing count 2 fold. They don't even pay any fees, being owned by ebay, so all the listings that they are padding, aren't even bringing in revenue???? Something isn't right here!
Isn't this making the stockholders think that listings are up, when they really aren't? We have all the proof documented. I even have it documented of when I was talking to Ebay Live Help and asking them about all the ads, being ended early and it immediately stopped, when they found out that we knew about it.
Please help us in exposing them, for what they are trying to pull. The boycotters should have a fair chance, to show what is really going on, behind the scenes.
Thank You
Tracy Fair and thousands of other ebay sellers.
P.S. You can find the revolt going on at: forums.ebay.com/db2/fo...
Ebay is causing sellers to leave in droves, with the new policy changes and tens of thousands are upset and will be protesting at Ebay Live 2008, this week.
The changes are idiotic. Sellers can no longer leave negative or neutral feedback, even if a buyer bids, wins your item, ingores your emails and doesn't pay. What right do they have to leave any feedback, if no transaction has taken place? We have sellers, bidding on competitors items and ruining their feedback, just to get a boost, on their own items.
Ebay went in and retroactively turned all neutrals, to negatives. Neutral, means just that, how can ebay call neitral, negative? They swtarted giving new discounts to people with good ratings, but they knock them down first, with the neutral change, so that many can't even meet the requirements, for the discount.
That is not the worst of it. We have thousands and thousands of sellers, who have closed their stores and we KNOW that the listing count should be going down. But, we have uncovered the source of the raised listing counts and I can't see it being anything, but fraud.
The seller BUY or Buy.com was taken on by ebay, right at the time ebay KNEW they were going to lose sellers. They are using buy.com, to pad the listings, to make it look like the count is up, when it really isn't. We have found thousands upon thousands of fake listings, that have no description and you can't even buy them. I found them ending tens of thousands of listings early, saying they are no longer available for sale and then immediately relisting them. Most likely to keep the sell through rate up and then relisting them again, to up the listing count 2 fold. They don't even pay any fees, being owned by ebay, so all the listings that they are padding, aren't even bringing in revenue???? Something isn't right here!
Isn't this making the stockholders think that listings are up, when they really aren't? We have all the proof documented. I even have it documented of when I was talking to Ebay Live Help and asking them about all the ads, being ended early and it immediately stopped, when they found out that we knew about it.
Please help us in exposing them, for what they are trying to pull. The boycotters should have a fair chance, to show what is really going on, behind the scenes.
Thank You
Tracy Fair and thousands of other ebay sellers.
P.S. You can find the revolt going on at: forums.ebay.com/db2/fo...