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

To: ShortyBear who wrote (3190)	5/14/1999 12:29:00 AM
From: blue_lotus	Read Replies (1) \| Respond to of 7772

Hi ShortyBear, Didn't understand the last part of your computation... but generally agree with your conclusions. >$300/sh may be possible if Ebay's performance convinces us that it will grow more than 40% per quarter for the next twelve quarters in a row. That's because the 991Q earnings of .05/sh would give the company a value of $6/sh if modest growth (P.E. 30) were expected. Phenomenal growth of 50%/quarter a/k/a 400%/year would lead to a 3 year projection of $6/sh x 5 x 5 x 5 = $750/sh. Here's my best case scenario for fundamentals of Ebay: (compunded growth of earnings at the rate of 50%per quarter) (Obviously very very aggressive but hey it is the best possible scenario right :-) Quarter Hypothetical Hypothetical Earnings True Value (with 200 Forward P.E.) 991Q .05/sh $40 992Q .08/sh $64 993Q .12/sh $96 994Q .18/sh $144 001Q .27/sh $216 So with the very very optimistic growth prospects we are about 1 year away from what would be considered being aggressively valued for its growth prospects. But 50% per quarter growth is very unlikely. And even if possible very unsustainable. So lets take a relatively less aggressive approach of saying that we have 25% growth per quarter Quarter Hypothetical Hypothetical Earnings True Value (with 100 Forward P.E.) 991Q .05/sh $20 992Q .06/sh $24 993Q .08/sh $32 994Q .10/sh $40 001Q .13/sh $52 002Q .16/sh $64 003Q .20/sh $80 004Q .25/sh $100 011Q .31/sh $124 012Q .39/sh $156 013Q .49/sh $195 014Q .61/sh $245 With 25% growth in earnings per quarter, we may have to wait for 3 years for proper valuation. And 25% sustained growth per quarter would be pretty incredible. I don't want to calculate the cases where they have the growth rate of an average healthy tech company of between 30%-40% per year. It may take a full decade for Ebay to catch up with its current price. -Raj P.S: But of course no one cares about fundamentals because they don't intend to hold on for even an year. They want a quick buck and feel that on a down turn they can all easily bail out .......