Ebay analysis

EBay Analysis
Sector – Technology Industry – Internet Software and Services Recommendation – Sell shares

Analysts: Peter Eghoff Lucas Mabey

Price (4/17/2006): 52-week Range: P/E (ttm): Shares Outstanding: Market Capitalization: Diluted EPS (ttm): Institutional Ownership:

$38.03 $30.78 - $47.86 49 1.41 billion 53.5 billion $.78 62.4%

Table of Contents

Executive Summary……………………………………………………………

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Company Overview…………………………………………………………….. 3 Recent News…………………………………………………………………….. Financial Analysis……………………………………………………………… 10 11

Valuation Model………………………………………………………………… 18 Technical Analysis……………………………………………………………… 29 Conclusion………………………………………………………………………. 33 Bibliography…………………………………………………………………….. 34

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Executive Summary
In 2003, EBay, the global leader in online auctions, wasselected to become part of the FIN 284 portfolio based on the company’s tremendous growth prospects and strong industry position. In the two and a half years since the purchase the stock price has increased significantly and our group has begun to reexamine the security to determine if it is in the class’s best interest to continue to hold the shares. The majority of our research focuses on areas suchas the future of the online auction industry, the potential growth prospects for EBay, and the risks of holding the security versus the benefits of taking profits. To assist in the evaluation of the security our group research includes a valuation model and technical analysis. Given the results of our research we feel it is in the best interest of the class to liquidate our EBay position and lookfor alternative investments. It would also be prudent at this point to sell in order to take profits from the nearly 200% return that the stock has generated over the past two and half years. Our recommendation is to sell the entire 600 share position at a price of no less than $35.00 per share.

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Company Overview

Founded in 1995, eBay has grown to become one of the great success storiesof the dot com era and is now the worlds leading online marketplace. Ever since the beginning of the company, eBay has witnessed tremendous growth rates. At the Initial Public Offer in September 1998, eBay shares traded at (adjusted) $1.97. Today, seven and a half year later, it is priced at nearly $40, a rise of almost 2000%. The strong rate of growth is also reflected in the financial numbers.1998 86,129 7,273 1999 224,724 161% 9,567 32% 2000 431,424 92% 48,294 405% 2001 748,821 74% 90,448 87% 2002 1,214,100 62% 249,891 176% 2003 2,165,096 78% 441,771 77% 2004 3,271,309 51% 778,223 76% 2005 4,552,401 39% 1,082,043 39%

Revenues Growth Net income Growth

The smallest percentage growth in either revenues or net income since 1998 has been in the low 30’s and has at times been muchhigher. However, while growth rates remain high, the explosive growth does appear to be diminishing.

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About eBay Mission Statement: “eBay's mission is to provide a global trading platform where practically anyone can trade practically anything.” As stated, eBay is now a leading market player within global trade. Currently more than 100 million people use eBay globally, and according to thecompany internet users spend more time on eBay than any other internet site. Virtually anything can be traded on eBay and on an average day millions of items are listed as either an auction or a fixed-priced offer. In addition, eBay also offers the payment service PayPal to ensure quick and safe money transfers. Other eBay sites include half.com, Kijiji, ProStores, Rent.com, and Shopping.com. Atpresent eBay employs 8,100 people.

Business and financials EBay’s main source of revenues are from listing, feature, advertising, as well as paid fees on transactions which include both fees collected from the selling part and from the usage of PayPal. The main market is the United States, which accounts for over half the revenues in 2004; however, international sales are...