Shares of the online auctioneer look like a value as the fast-growing company transforms itself into a cutting-edge retailer.

By MSN Money Partner Jun 4, 2013 5:02PM

EBay logoTeresa Rivas, Barron's Barron's on MSN Money


EBay is known for its hidden treasures, but the online auctioneer's stock may be the best bargain.


Compass Point analyst Douglas Greiner upgraded eBay (EBAY) to "buy" from "neutral" on June 4, establishing a $63 price target, representing about 18% upside.


"EBay is remarkably well positioned to benefit from the structural shift in retail to omnichannel solutions," writes Greiner. "We see the recent broader market turbulence as an opportunity to again re-visit owning the shares."


On June 3, the company announced that it will lead a $50 million investment in Indian rival Snapdeal.com. Along with an equity stake, eBay will also get access to the New Delhi-based firm's 20 million users and distribution network.


Excitement around PayPal's prospects

Greiner's case is that the company's expanding user base and the success of its PayPal online payment processor will combine to boost earnings power and cash flow, and ultimately to reward shareholders.


"There is excitement around PayPal's long-term prospects versus Visa (V), MasterCard (MA) and American Express (AXP)," he notes. "This group of elite payments companies is at the forefront of the industry in terms of brand and scale."


PayPal has seen its transaction volume double in the last three years, and eBay expects it can repeat that feat by 2015. Moreover, nearly half of PayPal's transactions come from overseas and 10% come from mobile devices, two markets that are growing very rapidly.


Wedbush Securities analyst Gil Luria, who thinks the stock can rise to $64, wrote in a recent note that mobile commerce data from comScore suggests eBay is the "clear leader in the transition to mobile. . . . We believe mobile devices play into eBay's strengths as consumers become more focused on a smaller number of well integrated shopping apps."


Mobile is increasingly taking hold abroad as well, another positive for eBay. Overall, 52% of eBay's sales came from outside the U.S. last year, and its presence in 40 countries gives it a first-mover advantage in many quickly developing markets.


EBay already has more than 123 million active users, a base that is growing by about one million new users per month.


Expansion in new areas

The company is shifting its focus away from its auction business, expanding into new areas such as eBay Now, a same-day delivery service that works with large domestic brick-and-mortar companies.

"We believe eBay's desire to partner, not compete, with other merchants makes it an intriguing player in the evolving world of commerce," wrote Morningstar's R.J. Hottovy last month.


At less than 16.5 times forward earnings, eBay doesn't look overpriced, especially considering high multiples at companies such as Amazon.com (AMZN), which trades for a whopping 82 times 2014 estimates.


Its long-term earnings growth rate of 16% is ahead of the industry average, and it has a healthy 13.5% return on equity.

Compass Point's Greiner notes that the company's strong fundamentals leave plenty of room for valuation to expand.


"The top end of management's 2015 adjusted EPS guidance equals approximately $4.00. A 20 times P/E multiple justifies an $80 share price based on earnings power," the analyst notes. "EBay ended 2012 with approximately $6 per share in net cash. EBay's guidance assumes at least $11 billion in cumulative 2013-2015 free cash flow (equal to $8 per share). Adding it up -- earnings power plus today's net cash  plus 2013 to 2015 cumulative free cash flow -- we calculate a bull case value of $94."


It might be too optimistic to hope that eBay will trade that high in the near future, but we think eBay still has room to run. 


More from Barron's:

 

With release of her company's first laptop running on Google's operating system. Meg Whitman is trying to take her mature industry where the younger generation is going.

By TheStreet Staff May 31, 2013 5:00PM

thestreet logolaptop running Google's Chrome OSBy Anton Wahlman

 

I'm typing this review on Hewlett-Packard's (HPQ) divorce papers from Microsoft (MSFT).

 

For the first time, HP has launched a laptop based on Google's (GOOG) PC operating system, Chrome OS. It's a wonderful 14-inch laptop priced at $300 with no expensive add-on gimmicks. You should buy one.

 

Before I get into the review, I have to set the stage for why this is happening. Why is HP no longer exclusive with Microsoft's Windows PC operating system?

 

It all starts with CEO Meg Whitman. When she assumed the role as chief executive, there were many fires to triage. Many things were about organizational management, balance sheet optimization -- frankly, firing layers and layers of fat. Blocking and tackling.

 

The accelerating consumer trend away from personal computers has some serious ramifications for investors.

By TheStreet Staff May 30, 2013 1:05PM

thestreet logoSurface tabletBy Dana Blankenhorn

 

The end of a technology era can be slow or sudden.

 

There are still mainframes. Minicomputers hung around for years after PCs and networks. Somewhere in this land of ours, someone is running a Novell LAN.

 

But in consumer markets, change can happen much more quickly. Back in the day the IBM PC killed the CP/M operating system very quickly. (CP/M was very similar to MS-DOS, but it wasn't.) Smartphones killed off most of the feature phone market in a very few years.

 

And so it is with the PC.

 

The stock has surged 70% in the 10 months since Marissa Mayer was brought in. It's about time for the company's bold moves to start paying off.

By StreetAuthority May 28, 2013 4:40PM
Yahoo logoBy David Sterman                                                      

Any time a new chief executive takes the reins of a struggling company, he or she is typically given a full year to implement a full turnaround.

That's the time in which the CEO can boost flagging employee morale, articulate a fresh game plan for Wall Street to assess and put the wheels in motion for a sustained upturn in sales and profits.

Yet when that one-year grace period (also known as the "honeymoon phase") is over, investors tend to take a much more circumspect view. Talk becomes cheap, and financial results start to speak for themselves.

July 16 marks the one-year anniversary of Marissa Mayer's debut as CEO of Yahoo (YHOO), so the time is at hand for a steady path to much improved results.
 

Expect the $475 billion market for higher ed to be cut in half by the rise of no-cost online college courses.

By TheStreet Staff May 28, 2013 4:12PM

thestreet logoonline classesBy Jonathan Blum

 

It's almost June. Time for dads and grads, and enumerating the living from the dead in the collapsing U.S. market for higher education.

 

Because if my month of learning collegiate-level data science via Coursera -- a Mountain View Calif., provider no-cost online courses -- is any indication, it's time for parents, educators, employers, students and investors (not to mention college real estate speculators) to learn how ugly it's going to get for institutions charging a lot to learn a lot.

 

Investors are already familiar with the course syllabus: Just like in the music, financial services and corporate IT sectors, it's absolutely, positively possible to get high-quality, first-rate content (in this case, a job-fetching college education) for nothing.

 

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