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Technology Stocks : eBay - Superb Internet Business Model -- Ignore unavailable to you. Want to Upgrade?

To: Steven Wexler who wrote (134)	9/22/1998 9:38:00 PM
From: Doug Fowler	Respond to of 7772

What is eBay worth? 1. eBay has the potential to have very high margins. Yahoo expects to achieve 30 percent margins within a year. eBay's gross margins are about 90 percent, but they have been crazy spending money lately. However, there is no reason to think that they won't be able to achieve at least 30 percent net margins whenever they choose to do so. 2. I expect eBay to report quarterly revenues of around $12M for the quarter ending in September, and $18M in the quarter ending in December. eBay is currently growing at a 4x annual rate. Let's say they grow three times over the next year and double the year after that. That would put them around $250M in revenues in 2000. If they then average 50 percent growth rates for the next 3 years, that would make them an $850M company in 5 years. At 30 percent margins, we would see $250M in profits. Assigning a very conservative 30 P/E at that time, we could get $7.5B stock value in 5 years, or about 10 times the projected IPO stock market cap. 3. The above numbers do not take into account all the complementary revenue opportunities for eBay. I know projecting out 5 years is unusual and risky, but I see little standing in eBay's way to accomplish these kinds of numbers. They'll probably get bought out by that time, but it will be at a premium. I would say if you can get shares for under $20, you have a chance at significant upside, and one of the least risky Internet stocks. (Disclaimer: Internet stocks, by their nature, are very risky.)