>>And because eBay has a MUCH, MUCH, MUCH, MUCH higher gross profit
than those companies.<<
and despite everything that is said on this board, even ebay recognizes the need to get into the lower margin standard auction business in order to keep growing. My guess is that we'll see more of this in the future as ebay tries to strengthen its position. Like every other business that starts off with out of this world margins, sooner or later, the market matures or the dynamics change, and margins narrow to normal ranges. There just isn't free lunch in the world. All the competitors are relatively new. Given time, they will slow ebay's growth, and with it will come down prices & unsustainable price multiples.
Of course, "this time is different" (the 4 ugliest words in investing)
In the mean time, if you're a trader, ebay could very well be a great play.
>> Everybody and their brother is trying to start an auction site. But NOBODY, NOBODY, NOBODY has made a dent in eBay's success. <<
This may be true, but it's definitely way too early to conclude that these companies will not ultimately slow ebay's business. No new competitor in any business is deemed successful/unsuccessful in a few months time - I for one wouldn't bet against amazon - they're marketing geniuses. In any event, Ebay's growth has clearly slowed over the last 2 months. So either the competitors are making a dent, or the market growth has slowed. Neither possibility is attractive to ebay investors.
Yahoo's joke of a auction is now up to 208K auctions, and growth is 117% for the year versus 68% for ebay (although ebay's auction growth has declined significantly over the last 6 weeks, yahoo continues to skyrocket). If everybody had your opinion, they would just stop using the service - it seems unrealistic that yahoo is generating 200K new users every week or 2 to make up for all these disappointed customers. A random search through the yahoo auctions suggests that multiple bids are being made for in demand items. Your experience with yahoo is that the service is worthless, but the numbers suggest otherwise. Not bad for a relatively new site, with very little promotion.
A company doesn't need to beat ebay, just give it a little old fashion competition and this stock will suddenly look very, very expensive. It will happen - maybe next year, maybe 5 years from now, but it will happen. |
