Wal-Mart vs. eBay: Which is a Safer Stock to Own? 36 comments
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Which is a safer stock to own right now, Wal-Mart (WMT) or eBay (EBAY)?
The knee jerk response would be to answer Wal-Mart as it just sounds safer.
What is in a name? Was it logical to buy stocks in 1999 because they had a .com at the end of their name? Why is it more logical to buy a stock just because it doesn't have a .com at the end its name today?
Unfortunately, that is what fund managers are doing today. They are selling eBay and buying Wal-Mart because Wal-Mart is considered a safe stock to own in a recession. Analysts agree as the average analyst recommedation for Wal-Mart is higher than eBay.Should you listen to the analysts and follow the fund mangers? The same analysts that give Wal-Mart a higher rating than eBay are also projecting a higher growth rate for eBay, including this year and next. eBay sells for 13.5 times Free Cash Flow to Enterprise Value, while Wal-Mart sells at 17.3 times. That means that eBay sells at a 20% discount to Wal-Mart, even though eBay is projected to have a higher growth rate. In addition, eBay has over 4 billion in cash and no debt, while Wal-Mart has net debt of over 36 billion dollars.
That must mean that there is less uncertainty surrounding Wal-Mart's business. Not so! Wal-Mart was losing market share left and right before the economy turned south. Same store sales were barely keeping track with inflation and still are not keeping track with inflation. Does that mean the country needs to stay in a recession forever for Wal-Mart to keep gaining market share?
In addition, goods from China are becoming more expensive and Wal-Mart utilizes China as much as any other retailer. eBay's growth is slowing but that is normal as the internet matures and eBay is affected by a slower economy. eBay's business is also safe in the long run. Amazon (AMZN) and Yahoo (YHOO) both tried to create auction sites and failed miserably. eBay has a virtual monopoly in internet auctions. There are no serious competitors, even though people have tried. In addition, within eBay are two high growth businesses, Skype and PayPal. If a growth multiple were to be applied to those two units, the auction business is being valued at closer to 10 times free cash.
True safety is in the value of the company you buy, not in a name. In the short run the irrationality can persist, but in the long run value will always win.
eBay is on my shopping list for the next time the market is feeling depressed, while I am looking for a short entry point on Wal-Mart.
Disclosure: none
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This article has 36 comments:
I agree with that concept, but I disagree on your conclusion. Ebay is sick, and continues to disappoint both buyers and sellers. It needs new management, and if that isn't changed soon, it may well be too late. Wal-Mart is the safer play.
Wal-Mart is a well established business with ups and downs, but people will always shop there.
Just my two cents.
A comparison to Walmart has no place here. It is nonsensical. Hands down Walmart will remain afloat due to the nature of the business model., particularly during these hard financial and electoral times.
What's in a name? The Street has now realized that ebay is in horrendously serious trouble and the "name" in stock speak equates: SELL!
If ebay mangement succeeds (I need spellcheck today), ebay will diminsh and vanish in a matter of just a few short years.
I suspect they are a chosen few switching around the i.d. 's. They are never substantiated and never above second grade level hit and run.
. . . a few short years? You're being very generous today, lol. I suspect that if the shareholders don't give Donahoe his walking papers and hit the delete button on his disruptive innovations eBay won't last more than a year.
Buyers, sellers, and management are at war with one another due to Donahoe and like any war, there's no winners - everyone loses.
Still working on site. Never dreamed it would be this complicated.
What wasn't in eBay's last qtr report is far more important than what was in there. For example:
1) There was no mention of the ongoing antitrust litigation.
2) There was no mention that the sell through rate has dropped like a rock.
3) There was no mention that hundreds of thousands of complaints have been filed by buyers & sellers because it doesn't work.
4) There was no mention that hundreds of stores closed due to disruptive innovations & a powersellers are leaving.
And next quarter there won't be any mention of this:
1) Best match is deleting listings right & left because it doesn't know the difference between dups & similar items.
2) Each seller only gets 10 items per page & eBay picks which page they appear on so theoretically items ending soonest could be placed on page 50 of search results & items ending in 30 days could appear on page 1.
3) Paypal 21 to 180 days holds have increased by leaps & bounds. SNAD refunds are being issued within hours of a purchase.
4) Best match now includes every factor you could think of except one - what the buyer wants.
5) Store owners got opted into a SYI guinea pig test that hides their listings and destroys their branding.
6) eBay is now 17th in intenet traffic - pre Donahoe it was 8th.
7) Shipping was capped for media sellers - thus putting them out of business because the rates didn't come close to reality. Shipping calculator can be used in lieu of capped rates but who would use it because it hasn't worked in over 2 years!
8) eBay keeps opting users into one guinea pig test after another.
Given the above, why would any buyer or seller stay? That's why eBay is fast becoming the internet's largest ghost town & a sell at any price.
You are misinformed! "The Street" is now beginning to catch on! Read some of the articles -- not the comments only -- from analizers from Seeking Alpha and other places. "The Street" has a new ebay mantra: Sell!
The ebay stockholders ALSO. are NOW beginning to vocalize protests! They have not gotten their dividends in a loooooooooooooong time! They have grown weary of the joke and are tired of the double speak!
There are DOZENS upon DOZENS of boards and articles all over the internet of sellers that have left left left and are doing nicely elsewhere! (Moi included!) The selling / buying experiences at ebay now is a shambles! ebay has openend Pandora's box and it will NEVER BE ABLE TO CLOSE IT AGAIN!!! Knowledge is power!
Ebay shot itself in the foot and hit an artery!
Sellers are already paying for Donahoe's 3 qtr damage control.
1) Increased advertising revenue is driving buyers away from eBay.
2) Paypal holds on seller funds are driving sellers away from eBay.
Even a low grade moron knows that a company is measured not only by the numbers but by management or lack thereof . Donahoe's disruptive innovations have shown the contempt he has for sellers and now they're leaving because he violated their trust.
You should also take a good look at eBay's Motion to Dismiss in Malone vs. eBay (2007 antitrust lawsuit) and compare it to recent policy changes. It's real interesting reading, lol.
ebay wants to be Amazon.
Did you know, that Amazon will close down the account of a problem BUYER? Yep. They will. No problem.
Every heard of ebay doing that? NOPE! It's greed. They don't care if a buyer cheats a seller ten ways to Monday as long as greedbay gets their share of the cut. Sellers are expendable.
Such blatant contempt! Proof positive that ebay hasn't a CLUE how to duplicate Amazon's winning formula.
It's called taking care of business, done properly. In sumation, it's called integrity. Honor. Scrupples. Now there's a big one.
Scrupples.
You are absolutely, 100% Correct about ebay's "numbers". Those numbers show a substantial profit, each and every Quarter - as far back as IPO. Yes, Yes, YES... you are correct.
It is also a fact that they have a huge on-hand cash asset. They would have even MORE cash, but they have used some of it to buy-back stock, which is a Plus towards shareholders, via the stock value.
Fat Cat Cash balance... beats its own and Street estimates... has a monopolistic business model... doesn't carry any actual inventory, yet monetizes a virtual inventory that places no financial burden upon ebay.
Where does all that money come from? Increased sales by its sellers and buyers? No, from increased fees. That is why there is concern for the lack of Growth within the site, for the last few years.
In the next few months, as more sellers remove their goods from the site, the revenue from those fees will decrease. To offset that decrease, ebay has instituted several new policies.
A new, higher 'backend' fee (Final Value Fee) for goods listed in the new 30-day Fixed Price format. Also, ebay changed the payment policy to essentially make all transactions payable via "Paypal Only".
I have no doubt that these policy changes will more than offset whatever financial loss ebay will feel as a result of sellers pulling their items, or their entire businesses, off ebay.
In the end, ebay will beat estimates, make a ton of cash and use it to, once again, offset the Options Bonuses paid to its higher-ups. Compare those Options to the Buyback, going back a few years. Start in the Skype, 2005 era.
Ebay will look like the Value stock and have a large cash reserve, but will still pay no dividends. Their cash reserve could be $100-trillion and it wouldn't matter one iota to a single stockholder, if ebay keeps it all for themselves.
If you hold the actual paper stock, turn it over and write on the backside, "$ 5,000,000,000" - that's as close as any stockholder will get to it.
Meanwhile, for those that actually use the site, what they see is this: More Cash to ebay, from fewer revenue sources (sellers). It's a game of diminishing returns. It can last, but just for a while. In ebay's case, due to their size, that time is measured in years, not months or days.
We have completed Year 2, as of this month, and are entering into Year 3.
Do the apparent differences in language skills provide clues into the intelectual and reasoning capabilites of the previous writers?
I find it very intrigueing that the pro Ebay people are working within a grammer school level of writing skills. Is this indicative of inteligence levels?
There are a multitude of analytical start points. Numbers are not the only means of measurement.
I never sold on Ebay, nor do I own any of their stock. I buy very rarely now because I feel that there is an overall degradation within the quality levels of the merchandise being offered.
It is true that Ebay does not have the liability of maintaining inventory, but when the onus of maintaining "the best deals" is placed upon the site's sellers it seems inevitable that maintaining best deal status in an ever competitive marketplace will prove to be problematic in the term for the independant sellers in the long term. There are limits to becoming "lean". If long term balance is not maintained, if fair does not enter into equations,if continual contraversy crops up with each minor shift in a business model, how am I too judge merit? How am I expected to judge in a favorable manner?
There are numerous ways to legally distribute a company's assets within a set of books. Quarter to quarter seems to me to be an extremelly shortsighted approach. The lack of proud long term game plans being announced publicly also gives me cause for concern.
Why is there no dividend offered to the shareholders? This is also a indicator of a company's merit when choosing a stock. Other indicators include buying and selling habits of a company's top tier. Meg sold a sizable portion of Ebay shares very close to her departure from a company she had run for 10 years. Why?
I find that there are too many areas that bear closer examination before I would feel comfortable jumping on the pro Ebay bandwagon. I had considered selling on the site and unfortunately was unable to judge them worthy in ways that are indicative of a well run business.
There are too many ifs that go unanswered for me to feel comfortable with the overall worthiness of Ebay.
Oh on second thought some of us think much faster than we can actually type and tend not to want to waste time proof reading our posts. We assume the reader is capable of filling in the corrections, much like shorthand. The is not a novel, it’s comment blog.
Some of the most intelligent people in this world are the poorest writers. One is by no means the measure of the other, to do so only shows a very narrow mindedness.
Is eBay worthy, your entire post is smeared with your pompousness. How much time did you put in to your post? Be honest.
eBay fixed rate for shipping DVD or CD = $3.00
USPS actual charges per their website:
$2.23 = media mail assuming less than 1 lb.
$1.75 = insurance (value up to $50.00)
$0.70 = delivery confirmation
$4.68 = TOTAL
Sellers will lose $1.68 per sale plus the cost of shipping materials (boxes & bubble wrap) which is at least another fifty cents to a dollar IF they ship media mail (2-9 day delivery) & not priority mail.
You are exactly right!
"Did you know, that Amazon will close down the account of a problem BUYER? Yep. They will. No problem."
"Ever heard of ebay doing that? NOPE! It's greed. They don't care if a buyer cheats a seller ten ways to Monday as long as greedbay gets their share of the cut. Sellers are expendable."
And eBay+++ has got his head shoved so far up that dark place it's pathetic.
I have to agree with the majority of the posts here. eBay is a walking corpse. The wellness of this company is in jeopardy and has never been in more dire need of new management than right now.
I am an eBay PowerSeller. I stopped selling back in February along with tens of thousands of other sellers. However, circumstances prevented me from continuing the boycott. I am still actively pursuing other venues for selling my wares.
I began selling again at the end of June. I knew it was only a matter of time before the Nazi-type tactics of eBay's new policies would destroy another 100% positive and honest seller - and now it only takes one buyer!
Let me briefly explain how eBay works to destroy the small seller:
A buyer purchased 4 DVD player/recorders. He receives them promptly, in perfect working order and as described. However, soon after, I receive an email from the scammer that reads:
"The recorder I received does not fit the description. I thought I was buying a HDTV recorder. In fact this is nothing more than a regular DVD recorder with an HDMI uplink."
Here is the title of my listing: HIGH DEFINITION DVD RECORDER HDMI 1080p iLINK!
Yep, that’s right! He states in his own words, that what I described and sold was exactly what I was selling, AND exactly what he bought! But he decided it could be what ever he wanted it to be! Why? Because he could!
He goes on to say: "I would like to return these recorders for a refund as I believe I have been misled through your advertisement. This is not as advertised. It is not a HDTV recorder."
No... it’s not a HDTV recorder, IT is a DVD Player/recorder as stated in the title and the body of the listing!
I emailed him back several times, willing to work out his mistake. He did not respond.
Needless to say he left me negative feedback: ”Seller Misrepresented Product”
Now it seems, buyers can get exactly what they pay for, but say they thought they were getting something else. Sellers can be penalized and charged higher fees for being honest? Why not bid on a worn out shoe and just say I thought I was buying a Jumbo Jet or a 5 bedroom house?
I received the typical canned response from eBay:
"We are very concerned about violations on the site and have thoroughly investigated your report. The eBay Privacy Policy prevents me from discussing the specifics of our investigation. I can tell you, however, that in this instance we didn't find evidence that a violation occurred."
The buyer will neg you and eBay will side with them. It doesn't matter what the buyer really buys, he can and will say what ever he wants.
This is the new eBay. Buyers, (and even your competition) CAN and WILL destroy your business, while eBay sits idly by watching the small business owner go down, all the while collecting higher fees as you struggle to repair the damage that is maliciously inflicted upon you.
A buyer has destroyed my 5.0 DSR's, lowered my feedback and credibility and blatantly lied in the process. eBay has done nothing but tell me, "We're just a venue and the buyer has a right to his opinion."
I feel there is a major conflict of interest, as eBay's hand has grown larger, digging deeper into my pockets and I will be paying 20% higher final value fees, as my discounts will no longer apply.
Convenient? YOU BET! More profitable for eBay? YOU BET! Easy to accomplish with the new policies? YOU BET!
Simply because I sold an item that was exactly as described and the buyer decided he wanted to change the listing to what he thought he should have.
My company is suffering and the worst part is eBay condones this type of malicious slander and out-right lying. It's funny how they are "just a venue" when it comes to sellers, but an advocate of scammers, fraud and bad buyers.
Thank-you for recognizing my linguistic skills. I do hope you view it as a bit more impressive when I tell you that I don't utilize spellcheck because I find it lacking.
I do believe that it is important to invest the time into doing something well because first impressions do count and are what you will be judged by.When someone doesn't want to waste time to do something properly I find myself questioning the possibilities that slop work is the norm.
I also find it interesting that you feel that you were being discussed. I mentioned no names.
Quality and the time spent to achieve it does ensure that mistakes are dealt with in a timely manner. It may take additional time to achieve but long term has little to fear from the levels unwilling to waste time. Ultimately, people willing to expend the energy needed to do something correctly put less effort into achieving success.
After we have taken the additional time in creating a flawless foundation, we can rest and wait. The slop work produced by people unwilling to waste time will inevitably begin to show the flaws and mistakes. At this juncture, quality will be able to kick ass, exerting very little additional effort.
Ebay, on the other hand, is making a lot of bad decisions lately and driving people away in droves. I used to sell there, but their new rules make it an unfriendly place for the small sellers (who were usually the ones with the best service). The unique, one-of-a-kind, and hard to find items they used to be known for are now buried beneath a ton of listings from places such as buy.com. It's no longer fun to buy or sell there, and many people are leaving because of it.