eBay - Superb Internet Business Model Message Board

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Technology Stocks : eBay - Superb Internet Business Model

EBAY 94.46

+0.1%

Jan 14 3:59 PM EST

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To: Bill Jackson who wrote (7044)	9/29/2002 12:37:14 PM
From: SBerglowe	Read Replies (2) of 7772

EBAY analysis from Yahoo: messages.yahoo.com You couldn't have said it clearer! One minor inconsistency that I see in your analysis is that 45% annual growth rates are over and neither you nor I will ever see those rates in our entire lifetime (assuming you are at least 30 yrs old, LOL) NOW, if we assume that EBAY can bring in a CLEAN $150 million in free cash flows x annum and if it can grow that free cash flow at 20% rate for at least the next 5 years, EBAY fair value now is somewhere around $27(FY03) -> $38 (FY07) and not $57 as priced today... LOL Justifying EBay’s current valuations or giving bogus $70 price targets on the basis of a skewed PEG ratio is plain irresponsible and stupid to say the least (this can be witnessed by the most recent folly pushed by Deutsche Bank Research Department)... What happened to Chine’s Walls? LOL And that is me being too optimistic here!!! If Meg expensed stock options in such a way as to reduce the above mentioned free cash flow by a modest 30% rate (remember, in EBay’s case that figure should have been reduced by at least 95%), the $150 million would be brought down to a more realistic figure of $105 million, and therefore EBay’s fair value (the price target now) would have been somewhere around $20(FY03) -> $30(FY07)... Is Ebay overpriced? LOL EBAY fair value now is somewhere around $27(FY03) -> $38 (FY07) and not $57 as priced today... " and... Even that's grossly unrealistic. It assumes that investors will continue to accept the premise that companies not paying a dividend have ANY value, regardless of growth or earnings. The whole argument of companies not paying dividends seemed to center on the belief that they could "put that money to work" and do far better with it (presumably through increased book value or something) than if they returned it directly to the shareholders. Can you think of an argument that has been proven MORE WRONG??? Dividends will be DEMANDED (certainly within 3 years, probably sooner). At the bottom of this secular bear market, the share price of all companies will be based on: 1) REAL book value 2) Dividend yield (5% being typical) Remember, for virtually every tech company, the REAL value of "intangibles" = $0 and "tangibles" = a few thousand (and that would be hard to get for the servers since there's no demand). In other words, REAL book value (for investor purposes) = cash on hand minus all (on- and off-balance sheet) liabilities/debt/obligations. I don't think eBay will ever be able to pay a dividend of more than a quarter or so and their "real book value" will be negligible (or negative). That pegs their MAXIMUM long-term share price at $5.

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