posted on March 9, 2001 03:18:30 PM
Analysts struck a mighty blow to eBay today.
They've warned that Meg and company can not meet their revenue targets by simply charging current users MORE fees in a slowing core business that depends on new acquisitions for their growth.
posted on March 9, 2001 03:28:06 PM
Yep it was also on CBS that eBay isnt making anything on antiques and art, SO it makes me wonder where this predicted revenue will come from. I think we will see more mass-merchants very very soon, or meg will be eating alot of crow.
posted on March 9, 2001 03:42:44 PM
EBay Shares Fall After Lehman Analyst Says Stock Is Overvalued
San Jose, California, March 9 (Bloomberg) -- EBay Inc. shares fell 13 percent after an analyst said the biggest Internet auctioneer's stock is overvalued and may drop by half if the company fails to meet financial targets.
EBay tumbled $5.13 to $34 in its biggest one-day decline since Jan. 5.
Holly Becker, a Lehman Brothers analyst, wrote in a report that EBay is trading at 119 times per-share earnings, even amid concerns that sales at its main business are slowing and that the company is dependent on acquisitions for growth. AOL Time Warner Inc., by comparison, trades at 37 times estimates.
``In our opinion, the stock is priced to perfection -- any slip would be `ugly' and could lead to a 50 percent drop in share price,'' Becker wrote in a report titled ``EBay: The Good, the Bad and The Ugly.''
EBay, based in San Jose, California, declined to comment, saying it doesn't remark about individual analysts' research reports or its daily stock price.
Becker considers EBay a ``shining star'' among Internet companies because of its profitability, business model and brand name, she wrote. She recommends investors remain ``on the sidelines,'' though, because of the stock's high valuation.
``The company would need to blow away 2001 estimates to outperform its current level,'' Becker wrote. ``Given our concerns about a slowing core business, a dependence on acquisitions for growth and various execution risks associated with new initiatives, we view this as unlikely.''
Growth Forecast
EBay aims to have $3 billion in sales by 2005. This may be difficult since it already has 80 percent of the Internet auction total gross merchandise market, Becker said.
Meeting that forecast would mean increasing revenue within new sales categories, as well as increasing advertising and fees in the U.S. by $2.55 billion in the next four years. Becker expressed concern that EBay's management may be spread too thin in pursuing growth programs and that costs will rise as it builds these new businesses.
``Overall, we believe that EBay could take a slower, more controlled approach to growth -- managing both the top and bottom line, especially given the lack of competitors in the space and its profitability,'' Becker wrote.
EBay's pattern of buying companies to enter some of its new markets has produced mixed results, Becker wrote. Fine-art auctioneer Butterfield & Butterfield Auctioneers Corp. and automobile auctioneer Kruse International have lost money since EBay bought them in 1999.
EBay also faces uncertainty as it expands in Europe and Asia because of the complexities of operating in other countries, she said. The company last month agreed to purchase France's IBazar Group SA and bought control of Internet Auction Co., Korea's largest online auction company.
Ratings, Estimates
EBay hasn't had as precipitous a decline as other Web companies. Its shares had fallen 63 percent in the past year, while the Street.com's 24-member Internet index had dropped 81 percent.
``I think it's fair to say that Internet stocks in general have been going through a volatile period, and EBay has been affected by that,'' EBay spokesman Kevin Pursglove said.
The company on Wednesday told investors at a Merrill Lynch & Co. Internet conference that it is continuing to build sales momentum in a number of businesses and that it hasn't changed its 2005 financial goals.
Other analysts, including Prudential Securities' Mark Rowen and Deutsche Banc Alex. Brown's Jeetil Patel have said they expect EBay to meet or exceed first-quarter revenue forecasts.
``The increasingly global and diverse nature of the EBay trading platform should provide the company with sufficient `cover' against the weak U.S. consumer economy in the near term,'' Patel wrote in a report issued yesterday. He has a ``buy'' rating on the shares.
Becker reiterated her forecasts that EBay will earn 33 cents this year and 62 cents next year. The average estimates of analysts polled by First Call/Thomson Financial are 37 cents this year and 64 cents in 2002.
Becker reiterated her ``market perform'' rating for EBay shares. Of the 26 analysts that follow EBay, 11 recommend it as a ``strong buy,'' nine list it as a ``buy'' and four rate it as a ``hold,'' said First Call.
Becker has become one of Wall Street's more influential Internet analysts. In November, EBay shares fell 21 percent after she lowered her rating on the stock because of concerns that the company's business was slowing.
posted on March 9, 2001 06:25:40 PM
We all know what actually SELLS on the internet - sex!!
If it comes to survival will eBay face reality and go for the BIG market?
posted on March 9, 2001 07:01:11 PM
Lehman's Becker knocks eBay: Trouble ahead?
Shares of eBay fell in morning trading, dropping almost 12 percent after Lehman Brothers analyst Holly Becker issued a pessimistic report on the online auction company.
In a report titled “the good, the bad, and the ugly,” Becker said “the company would need to blow away 2001 estimates to outperform from its current level.”
“Given our concerns about a slowing core business, a dependence on acquisitions for growth, and various execution risks associated with new initiatives, we view this as unlikely,” she wrote. And given that eBay is no longer a takeover target--an insurance measure if times get tough--we suggest investors stay on the sidelines.
eBay (Nasdaq: EBAY) shares were off $4.63 to $34.50 in morning trading.
Becker made a splash last year when she was one of the first analysts to change her mind about Amazon.com (Nasdaq: AMZN), saying she was “throwing in the towel,” on the stock.
She was somewhat kinder to eBay, noting that there wasn’t really an “ugly” side to eBay’s business.
Rather, it was the company’s valuation that troubled her, particularly at a time when dot-com companies are seeing their values plunge.
eBay is currently trading at 119 times Lehman’s 2001 earnings estimates, compared to 37 times estimates for AOL (NYSE: AOL).
“At $39 per share or $11 billion market cap, the company offers an unfavorable risk/return,” she wrote. “With the multiples for other leading Internet companies continuing to contract--eBay's lofty valuation only gets richer.”
Becker did praise certain aspects of the company’s business--its profitable business model, strong brand name, low customer acquisition costs and critical mass of buyers and sellers--but added that all these factors have been in place since the company went public.
eBay did manage to best analysts’ expectations in the fourth quarter, posting pro forma net income of $25 million, or 9 cents per share, on sales of $134 million. And while that marked an 81 percent increase in revenues, analysts were concerned even then about slowing growth.
eBay had set a goal of reaching $3 billion in sales by 2005, a target that will be difficult to reach given the current market. And much of that growth will have to come from new businesses, since the company is only predicting that 15 percent of that revenue will come from collectibles.
"So where will the new growth be coming from?" Becker asked. “In effect, the company will need to simultaneously build four or five multi-hundred million dollar businesses over the next five years! Clearly this will not be easy given--especially given the complexities in each of these new business segments.”
eBay officials were not immediately available for comment.
eBay’s ambition to become a “Wal-Mart of the Web,” a place where users can buy and sell anything, anywhere, could also cause trouble, Becker wrote. The growth could dilute management resources, and the core brand, and ultimately put pressure on margins as it hires staff and bulks up IT spending.
“To us, this is frighteningly similar to Amazon and PriceLine--both of which found traction outside of their core business disappointingly slow and a drain on resources,” she wrote.
Some of that expansion has come through acquisitions--eBay has purchased three companies over the past nine months, including half.com, Korean auction site Internet Auction Co. and French site iBazaar.
Becker said the company “may struggle to integrate and monetize each of these companies given its poor record in previous acquisitions,” pointing out that acquisitions of Butterfields & Butterfields and Kruse International are still not profitable.
posted on March 9, 2001 08:20:25 PM
Interesting report. I think eBay has taken a "smoke and mirrors" approach to investors, treating them much the same way they treat their customers (us). One reason the stock is overvalued is that it doubled following Meg's predictions last year. Now it seems eBay may not be able to back up its claims. Investors are seeing past the "buzz." The stock may go back down by half, and then some more. Can eBay keep pulling rabbits out of the hat? It seems every move further alienates its core customers. I'm starting to think eBay will need a miracle. They should have stuck with the platform that worked. So what if they levelled off at a few billion in sales? And let's face it. Pierre, Meg & Co. are all richer than Midas. Do they even care what happens to eBay? I know I would have retired long ago!
posted on March 9, 2001 10:47:17 PM
A newsfeed out of Japan murmured that Greenspan was about to resign, or leave. Anything related to the downturn and him leaving?
posted on March 10, 2001 02:16:19 PM
How many millionaire analysts are there and let us know when you find out?
"...And while that marked an 81 percent increase in revenues, analysts were concerned even then about slowing growth."
Ebay posts an 81% increase in revenues in the 4th Q, and we're supposed to worry if they can make their earnings numbers? Auctions are good during bad economies because people shop for bargains, and for used items. So I wouldn't worry about "current conditions." Also, there may be many distressed buisnesses looking to liquidate their inventory and ebay is a prime place for that.
"Prudential chief technical analyst Ralph Acampora. On March 10, 2000, the day of the peak, Acampora forecast that the Nasdaq could surpass 6000 in the next 12 to 18 months. Whoops. The following Monday the Comp teetered and dropped as much as 205 during trading, closing down 141."
So much for faith in analysts.
[ edited by quickdraw29 on Mar 10, 2001 02:49 PM ]
posted on March 11, 2001 02:35:51 AM
Gravid, Sex doesn't actually "sell" as well on the internet as most think. It garners its level of attention because it's sex. Auctions and the internet have sharply driven down the price and reduced margins of all adult products. The main reason why "some" sex sites make money is because content is cheap or in many cases pirated, and copyright is almost impossible to enforce in the adult biz.
As for ebay, I think that the attempt will be to more and more bring in the big sellers. Features like "buy it now", in my opinion, greatly masked the last few quarters figures. Lots of sellers used them, but long term only big sellers will....due to the fact that they can re-inventory efficiently and of course because of the impending fees there. You got to hand it to them, it was smart to do this, as it made the last X'mas look real good. The problem, looking into the future, is that as ebay gets more and more dominated by big sellers, the uniqueness will evaporate and avg. sale prices will go down the toilet. Why? Because ultimately big sellers who are running businesses will set prices in such a way so that they can move the merchandise. So they'll make sure there's 10 copies of a popular DVD title available at all times for which they'll get $12.99 or something. They're not going to search (like collectors or part timers would) for 3 copies of an obscure Sharon Stone video from 15 yrs ago. They couldn't be bothered, whereas we might because we "might" get $20 or $200 for each of them. So eventually all the big sellers will have the same stuff you can get at Walmart.
posted on March 11, 2001 05:19:29 AM
chupacabra4u2- Well said. The industry will become homogonized and variety at an all time low with the heavy sellers invading. Grab the most unique items now while you can and beat them that way! It's happened in other industries and will happen in ebay. The next thing to happen will be the decline of sellers on ebay for lack of interest by the buyers in similar products. Best of luck. Amazon teaming with Wal Mart on the other hand is genius and must have poked ebay in the eye as well. Watch Amazon as the leader, despite it's lack of buyers at this time.
posted on March 11, 2001 06:05:23 AM
Here is a post from the Amazon thread by Reamond dated 1-31-01.
"Financials are a huge problem at Amazon.
.....
Buy out: Wal-Mart would be a likely buyer, as well as several other B&M retailers. Wal-Mart's discount wholesale supply model is exactly what Amazon needs to cut costs.
I am still baffled how an internet retailer as large as Amazon which does not have B&M cost structures such as real estate, moving and handling unsold inventory to stores country wide, redundant point of sale costs, etc., can not show a profit, and offers little or no discount over B&M retail in pricing.
Internet retailers have a huge advantage in cutting costs as compared to B&M retailing, yet the consumer has seen little of these savings in price discounts. Did anyone at Amazon ask themselves why would anyone purchase at Amazon when the price is the same at a B&M or cheaper when shipping is added ? Convenience will not win the day in the long run.
I haven't bought anything at Amazon in nearly a year - everything is cheaper locally.
I can not see a company with billions in gross sales just folding though. "
