eBay revisited

Last month, I noted that Yahoo!, eBay, Amazon.com had all made 52 week lows, and explained why I don’t like to buy stocks in that condition (fresh lows).

Today, eBay is, once again, making 52 week lows. The blame
today goes to Google’s GBuy, the forthcoming competitor to PayPal, eBay’s
online-payments market. Its hardly a secret, as there have been major stories out on this for months. I suspect some of the pending legislation vs. VOIP may also be
hurting eBay, given their recent (expensive) purchase of Skype.

As someone who uses PayPal as a buyer on eBay, and as a seller of research, I cannot begin to tell you
how thrilled I am with this. At the very least, competition in the space will be
a very good thing for buyers and sellers alike, as it will reduce part of the
transaction cost of buying goods and services online. Add to that the less than
stellar history of PayPal’s customer service, and you have a competitor very
likely to take market share away.

Paypal has been a huge cash cow for eBay, responsible for 25% of revenue an even a bigger chunk of profits. That forward P/E of 28 could
suddenly get a lot more expensive if their earnings drop.

And that’s before any anti-trust complaint from Google, if and when eBay refuses to allow a competitive
service for payments on its auction site.

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