eBay, Inc. (EBAY)

Just finished researching this stock. Needless to say EBAY's profitability and stock valuation are outstanding. PE, CASH RETURN, RETURN ON EQUITY, PE VERSUS HISTORIC PE.....By all these measures stock is undervalued. They will be able to whether a depression type era because they have no debt and are cash flow positive. Worst case is that they may have to exit small markets and cut overhead count. They employ a lot of people. Growth and Earnings stability are questionable in the short term. Long term prospects are great because the moat they have. Buyers looking for odd or hard to find items can find almost anything on EBAY. Contrary to what some may say their search is pretty good. EBAY will have to reduce commission fees and bring the balance back to the FORCE however between buyers and sellers. It strikes me as odd that sellers can no longer leave feedback on buyers.





So why should they reduce fees? I think they should reduce fees because their moat comes from being the place where you can find anything. From the seller's perspective lots of eyes make it easy to sell hard to sell products. So Volume begets Volume. With a slow economy lowering commission fees is like giving the tax payers a tax break. This should increase sale transactions. Remember their moat comes from sales transactions. I think right now it is critical for EBAY to do this even though the stock price and immediate earnings could take a hit. So here are three solid reasons they should bypass current earnings for future earnings by reducing fees:


1) Volume begets volume. Moat will increase relative to competition.


2) Will enable their sellers to cut prices making EBAY a place where shoppers can still get a good deal.


3) Profit margin relief for their sellers. You don't want EBAY to shrink 20% because 20% of their sellers are forced out of business in a slow economy. This would allow small start up competition to potentially gain a foot hold.





Personally I can't stand paypal. As a casual shopper its a hindrance. On the otherhand I buy 5-10 things a year from EBAY. Its really a great website to comparison shop and to find items that would normally (without EBAY) be impossible to find.





I read some of the complaints from other posters about EBAY. So i did a test. My 4 year old's (Easter Bunny present) from two years ago broke. I've tried but I can't fix it. So I though maybe EBAY will have it. Someone else bought this so I had no idea what to type. I started with Easter Bunny "lets go to the hop". Nothing hit. Then I tried Singing Easter Bunny. Only one came up but there was a picture of the 2006 Hallmark Easter Buddy..... You would never find that item on any other internet site





Bottom line. EBay is a really great company with a moat that no one else can reproduce. Company is finanically strong and extremely profitable. Company will make money next year too. Stock is priced for a worst case scenario which is unlikely to happen. They have made and will make more mistakes but their moat will allow them to correct things and keep the good ideas. They are profitable and will be even in the downturn. Ebay was selling for current prices back in 1998 or 1999. So I'm buying. Its my chance to finally buy a rule breaker who is also a blue chip company at a value stock price. Can't be beat.