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Technology Stocks : eBay - Superb Internet Business Model
EBAY 95.79+1.4%11:57 AM EST
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To: SBerglowe who wrote (7036)9/18/2002 4:49:08 PM
From: geoffrey Wren  Read Replies (2) of 7772
 
Haven't looked at EBAY for awhile. I always had a negative opinion of it. But it is generating a lot of cash. The balance sheet is pretty straightforward; not much possibility that they have been capitalizing current expenses.

So that leave the high PE of over 100, which is pretty high, but I could see a 50 PE as fair value on this.

Regarding diminished retail sales generally, EBAY has grown even in this tough market. They would have grown more without the recession.

I question the solidity to the business model, and how safe they are from new competition. EBAY is revolutionary a little like the first department store was revolutionary. Originally, the department store had many different vendors under one roof. Shoes was run by one guy, jewelry another, etc. But other stores copied the model. I think Sears was the first to operate every counter in house. That Sears type of consolidation won't happen on the Internet.

But that leaves open the possibility of meaningful competition in the hundred thousand vendor internet department store. The vendors on EBAY can use freely experiment with any other provider. My impression is that much of EBAY sales now are for people having little continuing operations. They sell the same jewelry week after week. No reason they would have to stick with EBAY. I can imagine a start up called: SmallStores.com. The vendors could list their wares on both EBAY and SmallStores. The question is whether and when EBAY loses its dominant share. Yahoo took them on, but without much success. It might be hard to dislodge EBAY from dominance, and they are sitting on the internet, where retail sales are bound to grow much more than retain sales generally.
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