by winston » Fri Feb 24, 2017 2:48 pm
Ultra-Cheap Value Stocks to Buy Now: eBay (EBAY)
by Lin Cheong
EBAY P/E: 5.4
Some value stocks become cheap because investors believe that a competitor is about to eat (or already is eating) its lunch.
For eBay Inc (NASDAQ:EBAY) — the auction site that was one of the first true e-commerce success stories — that competitor is Amazon.com, Inc. (NASDAQ:AMZN).
The assumption that eBay is always about to be trampled by Amazon is a big reason why shares are trading at less than 6 times earnings while the market continues to set new records.
However, Christmas of 2016 was very, very good for eBay, with earnings of $601 million on revenues of $2.4 billion. The site consistently delivers operating margins of 25%, and its $7.5 billion in long-term debt is nearly equaled by the $7.13 billion of cash and short-term securities on its books at the end of 2016.
eBay is no longer just an online garage sale. It includes StubHub, the ticketing site, a host of local classified ad sites and an open source platform that lets merchants access its application program interfaces directly.
The company continues to open new markets, like wine, and the stock has advanced 13% since the start of 2017.
The success of eBay continues to create successful businesses like eDropOff, a consignment shop founded in 2004. Conscious that not all eBay sellers are honest, the company has launched an authentication program for luxury goods.
I don’t think eBay is going to be a high-flyer again, but neither do I think Amazon is about to kill it, if only because the risks of dealing with, and accounting for, fraud are costs a company like Amazon is just not interested in facing.
If you believe in the second-hand market, then, you can buy eBay with some confidence. It’s a tech stock that should do well when the next recession hits. And given that the current recovery is now 8 years old, wise investors should be ready for a recession.
Source: Investor Place
It's all about "how much you made when you were right" & "how little you lost when you were wrong"