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Technology Stocks : eBay - Superb Internet Business Model

EBAY 82.79

+2.4%

3:59 PM EST

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To: Robert Rose who wrote (4227)	7/24/1999 1:10:00 PM
From: Doug Fowler	Read Replies (3) of 7772

Robert: I would argue that the P/S sales ratio based on a conservative forecast of $200M for 1999 would be 68 (based on today's stock price). eBay did $34M in the first quarter. If one assumes 25 percent sequential growth for the next three quarters (and that is reasonable based on current growth rates), one comes up with $196M. Aside from the outage, this past quarter would actually show growth of higher than 25 percent. As far as earnings, I have no doubt that at any time eBay WANTS to do so, they can show after tax profits of 25 percent of revenues. Applying that to $200M for 1999, we would get $50M in profit, for a P/E of 270. (Now, I know eBay is not going to show $50M in profit this year because they should be spending more of that money to build the infrastructure and attract new business. However, with gross margins around 85 percent, the 25 percent after tax margins are reasonable, once eBay gets to the right point.) I do agree that the immediate future for the stock is questionable, and I can see eBay falling below 100 in the next few weeks.

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