When eBay Inc. (NASD:EBAY) announced its Q1 results (see conference call transcript), Wall Street promptly pulled the stock price down to levels it has not seen since last August. The stock now trades at 12.5 times revenue. For the sake of comparison, Google (NASD:GOOG) is at 20 times. Investors can argue that Google may be growing faster, but eBay may have fewer real competitors.
Revenue for the first quarter was $1.390 billion up from $1.032 billion a year ago. Net income was $248 million down from $256 million. However, non-GAAP operating income with adjustments for items like stock options rose to $461 million from $367 million.
All of that news actually looks pretty good, but the markets were troubled by guidance: Revenue for Q2 will be $1.370 to $1.415 billion and for the year 2006, $5.7 to $5.9 billion. The news took 8% off the eBay stock price. According to Yahoo!Finance, last year eBay did $1.086 billion in Q2 and $4.552 billion for the year 2005. How many companies can offer this growth rate off a $5 billion revenue base?
eBay is also about to launch a mobile version of PayPal (eBay's business for sending money and buying merchandise), Skype is growing at a rapid pace, and the new eBay Express, a specialty site where items would be available for immediate purchase, is coming to market.
Not everyone is betting against eBay. According to forbes.com, Standard & Poor's Equity Research is keeping its buy on eBay with a price target at $48.
eBay is still a fast-growing business. Google is starting competing services, but they have done that in other areas, like finance, without an obvious immediate success or impact on competitors.
With its stock below $37, eBay is cheap.
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at firstname.lastname@example.org.