HG, I can't be enthusiastic right now re: ebay - short term or long term:
Short term TA:
For the last month, the stock has developed a trading range of 155-125. It is now at the base of that trading range for the third time in a month. If it declines further from here, the stock should rest at about 100, where it will again find strong support. On the upside, however, 155 is now significant resistance.
Intermediate term TA:
The stock has been in a steady decline since mid-April, losing nearly 50% of its value in these 3 months. Its 20 day ma crossed its 50 day ma a full month ago, and it is well below its 100 ma as well. One could argue the stock is putting in an intermediate term bottom here. Which way the stock goes, then, will like depend on near-term news such as interest rate developments or Ebay's upcoming earnings report.
Long-term FA:
To buy or even hold the stock at this point, one has to believe in Ebay's long-term fundamentals. Here are my concerns:
1) Slowdown in 13-week auction count growth. This has been a well-documented (thanks Doug!) and persistent phenomenon since 1Q99, when it reached as high as 70%, and then steadily declined to its current 25%.
2) Persistent system problems. Obviously, if these were easy to solve, that would have happened some time ago. The issue now is not if there will be problems, but how severe they will be, whether they will trigger refunds or duration extensions, and if so, for what percentage of the seller community.
3) Increased competition. The just-reported figures augur well for Yahoo, showing a 42% increase in traffic, vs. an 8% decline for Ebay. Moreover, Yahoo's auction counts are now about 20% of Ebay's, vs. 15% not long ago. As Doug consistently points out, the name of the game in online auctions is critical mass. The $64k question is at what % of market share will Ebay lose its critical-mass advantage. Doug will know it by a persistent decrease in the effectiveness of his Ebay auctions, and a persistent increase in the effectiveness of one or more of his non-Ebay auction sites.
4) Management Quality. I just can't help but wonder if these system problems don't point to a larger management issue. I mean, is Ebay management really up to competing against the likes of Bezos?? I think you can guess my answer to that question.
5) Valuation. Ebay has a trailing pe of 1,827 and a market cap of 16B. Is this already rich valuation likely to increase? Or given the above points, is Ebay's valuation more likely to migrate further toward the mean?
There are now hundreds of publicly-traded internet stocks, and more coming 'online' all the time. Seems to me there are easier, much less risky ways to make $ going forward.
Unless of course it's shorting the stock....
Disclaimer: Neither short nor long Ebay at present. |
