eBay's True Value
As an eBay company (not stock) bull, I thought I would provide an analysis of the realistic potential of eBay over the next five years.
1. Throw out all the idiot analysts projections for this quarter. They have NO CLUE. eBay should do $20M in revenues this quarter. If they don't, GET OUT as quickly as you can. This is the Christmas quarter. eBay sales are already 50 percent ahead of the same time three months ago, and SHOULD accelerate in the weeks before Christmas.
2. Don't expect eBay to grow 50 percent each sequential quarter. They will PROBABLY grow by more than 50 percent this quarter (because of Christmas), but don't expect them to duplicate that next quarter.
3. So, let's use $20M in sales for the 4th quarter as a base. Let's assume, sequentially, eBay grows 35 percent in Q1, 40 percent in Q2, 25 percent in Q3, and 50 percent in Q4. That would make 1999 Q4 sales on the order of about $70M.
4. For 2000, let's use the following sequential growth rates: Q1: 33, Q2 27, Q3 22, Q4 40. That would put 2000 Q4 sales at about $200M.
5. For 2001: Q1 27, Q2 33, Q3 15, Q4 33. This would put 2001 Q4 sales at $516M.
6. For 2002: Q1 19, Q2 29, Q3 7, Q4 28. This would put 2002 Q4 sales at $1084M, or at an annual rate of about $4B.
7. Let's also assume 50 percent ANNUAL growth in 2003, bring annual revenues to about $6B.
8. Let's assume that at some point in the next few years, eBay actually tries to make a real profit. 30 percent after tax margins are a reasonable expectation. So, by 2003, eBay could show close to $2B in annual profits.
9. Assuming a 30 percent annual growth rate going forward, eBay could be assumed to be worth about $60B in five years, more than 10 times its level now.
10. Watch eBay's growth like a hawk. If you ever see two weeks in a row of a decline in weekly auctions, GET OUT. If over a month's time, you see no growth, GET OUT. If you see more than a 3 percent decline in any single week, GET OUT.
11. Finally, realize that the confidence of these projections gets weaker over time. They are relatively safe for this quarter and next year, but beyond that, who knows? They're just projections, after all. A lot of it depends on whether the competition gets smart over the next 6 to 12 months.
If, by this time next year, Yahoo, AOL and/or Microsoft doesn't bring in the high traffic buyers AND sellers (no matter what it takes), eBay will be more entrenched than ever. |
