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Also, it troubles me that so many people seem to expect eBay's auction count (i.e., growth) to continue a steady rise, as if it should be completely unaffected by the time of the year. There simply isn't any history to go by as far as Net auctions are concerned, but common sense would certainly say that the summer will always be a leveling-off period for them. This adds up to me as unrealistic investor expectations, which doesn't help the share price either.
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It troubles you because people have unrealistic expectations that the auction count should rise? Huh? These expectations are completely and absolutely reasonable: the auction count MUST rise to justify the extraordinary valuation of this company. There is no other option. Plain and simple, EBAY can not and will not maintain a valuation of 75-100 times forward revenues without a sustainable forward growth rate of 150-200 percent per year. You can HOPE, or PRAY that the auction count will be kick started in the fall and the spring to make up for the short falls in the summer and holiday season, but at the end of the day, this is called risk. Is the typical EBAY investor willing to accept the risk of a 90% downside potential on this investment because he/she is optimistic that the fall will reverse the current trends? And even it does, will it be enough to continue a 150-200% per year forward annual growth rate? I personally would not unless I felt that there was an excellent chance of a 10x return. Well, that maps out to $150+ Billion, and given the current situation, that's a fantasy. The "unrealistic" expectations are built into the stock price. If it does not meet these expectations, the price will plunge, dramatically. |
