Robbie Stephen's Keith Benjamin ups the bid to $151/share in tomorrow's Wall Street Journal ($6BB market cap - you do the math.)
Meet the net's newest and hottest franchise.
Read it and weep (since you are obviously short). I say it gaps to $80 on the open tomorrow, and as you pointed out, I know a thing or two about short squeezes. ;)
October 26, 1998
Street Is Sold on Idea eBay
Will Lead Auction Market
By LISA BRANSTEN
THE WALL STREET JOURNAL INTERACTIVE EDITION
SAN FRANCISCO -- Monday's runup in shares of online auctioneer eBay
shows that uncertainty can be an asset -- if it involves emerging Internet
businesses.
Shares of eBay surged 23 1/4, or 46%, to close at 73 3/8 on the Nasdaq Stock
Market.
Meanwhile, the Nasdaq Composite Index rose 31.11 to 1724.97, and Morgan
Stanley's high-tech 35 index gained 14.29 to 605.02.
More surprising than eBay's jump on Monday,
however, was the 308% its shares have rocketed
since they went public at $18 a share exactly a
month ago. Optimism that eBay will report
strong third-quarter results on Tuesday was one
factor behind the enthusiasm, but even more
important may be the great unknown: how big
the market for person-to-person auctions will
ultimately be.
The company's main business is hosting auctions
of goods ranging from antiques to Pez
dispensers to Beanie Babies. It makes money by
charging 25 cents to $2 to post a listing and then
charging the seller a commission of 1.25% to
5% if the goods are sold.
Monday's gains were sparked by a research report issued by Jamie Kiggen of
Donaldson Lufkin Jenrette, who estimated the global marketplace for
secondhand goods to be about $180 billion. Given that eBay is the category
leader in the area of person-to-person Internet auctions and has a "massive,
loyal and growing customer base," he said he believes that eBay's shares could
get as high as 100 in the next 12 months.
His published estimate is that the company will report revenue of $10 million,
but in Monday's report he notes that there is a good chance the number may be
better.
"The biggest question with eBay is 'How big can the business be?' " said Keith
Benjamin, an analyst at BancBoston Robertson Stephens. In a research report
published last week, analysts from Robertson estimated that the U.S.
collectibles market was about $43 billion last year excluding classified
advertising. But, the report continued, "the total market size is not obvious
unless you think about what you collect, and what you would be willing to sell
before throwing it away."
The company may be getting something of a boost from institutional investors
who feel they missed a chance to get into Internet highfliers like bookseller
Amazon.com, Mr. Benjamin said.
Also, investors appear to be willing to pay premium prices for the four
companies he defines as "franchise companies," or companies that are leaders
in a still-nascent Internet category. Those companies are America Online,
which is the leading provider of home Internet access, portal site Yahoo!,
Amazon and eBay.
Also, eBay is one of the few Internet companies
that has consistently turned a profit since its
inception. While the market for Internet
auctioneering may not prove to be as big as the
market for books, Mr. Benjamin said, the
margins are so much better that eBay may
deserve a valuation close to Amazon's market
value of nearly $6 billion. Based on Monday's
prices, eBay carried a market value of about $2.8
billion.
But while the market may be huge, it is far from certain that eBay will be able
to keep it all for itself, said Maria LaTour Kadison, an analyst at Forrester
Research, a Cambridge, Mass., market-research firm.
Highly trafficked sites such as Excite and Yahoo have launched auction sites.
Although activity on those sites is tiny compared with eBay, they offer buying
and selling for free, which could ultimately make them more attractive to
consumers, she said.
"eBay is the clear leader right now in the space, but it has some big challenges
that it has to address," she said, adding that "I think this market is going to go
very quickly" toward a business model based on advertising revenues --
meaning weaker margins for auctioneers. |
