posted on June 23, 2008 11:27:30 AM new
Throw This Stock Away
By Rick Aristotle Munarriz June 23, 2008 Comments (2)
5 Recommendations
I've been tossing a few stocks into the trash bin this month. It's not because I'm a meanie. I'm a bull at heart. However, I feel that if I'm holding onto an inferior stock -- with superior alternatives readily available -- I owe it to myself to move on.
So I'm back for another week of cleanup duty. I've got one stock that I suggest you dump, and three potential replacements that I believe will outperform the equity that I'm trashing.
Who to heave this week? Come on down, eBay (Nasdaq: EBAY).
These berries are ripe for the plucking
If verbs were dollars, eBay would be the richest company on the planet.
* My wife told me to eBay my old record collection to make room for her stuff.
* I'll PayPal you the money for my fantasy football league this afternoon.
* Skype Me!
However, things aren't exactly verbalicious in eBay's world these days. Meg Whitman, the charismatic CEO who guided the company through most of its growth spurt, left in April. Power sellers are more restless than usual, as if the wave of boycotts, lackluster growth, and unimpressive turnout at last week's eBay Live annual powwow weren't putting enough weight on the namesake site's shoulders.
I know that eBay is smarting for auction activity when I get not one, but two email coupons this month, offering 10% off on a completed auction purchase if I use PayPal to seal the deal. 10%? Of the purchase going to someone else? As high as the fees on eBay and PayPal may be on the selling side, it appears that eBay is willing to take a hit just to stir up some quarter-end activity. I smell smoke. Do you see the fire?
This has not been a good year for eBay, even though it did bounce back from embarrassing back-to-back, year-over-year declines in listings during last year's second and third quarters.
PayPal is still a star, but if that umbilical cord is still tied to eBay, even the micropayment service may stumble if eBay loses relevance over the next few quarters. Then you have Skype, which is growing quickly. But eBay already had to take a massive impairment hit there, which is bean-counter-speak for "I overpaid for Skype."
Even if eBay is low-balling the analysts when it projects earnings to grow in the single digits this year, the future is clouded with challenges that a maturing company with a growth stock multiple will be hard-pressed to overcome.
Good news
I promised to have three alternates for eBay, and here they are.
* Bidz.com (Nasdaq: BIDZ): As far as stateside auction sites go, Bidz isn't the biggest. It certainly isn't the fanciest. However, it is one of the most exciting (as a simple click to its landing page will find you knee-deep in several auctions that are about to end). By specializing in jewelry, Bidz has built up a niche audience. You see it in the company's growth. Earnings and revenue were up 34% and 39%, respectively, during its most recent quarter, well ahead of where more conventional online jewelers, like Blue Nile (Nasdaq: NILE), landed during the same three months.
* MercadoLibre (Nasdaq: MELI): Just as eBay hit speed bumps last year in the United States and Germany -- its two largest markets -- MercadoLibre was lighting it up in its strongholds of Argentina and Brazil, as it expands throughout Latin America. The growth is impressive. The company posted first-quarter results last month, brandishing a 75% surge in net revenue, with pre-tax profits soaring 163%. The one knock on MercadoLibre after last year's scorching IPO was its valuation, but the stock has shed half of its value since peaking six months ago, despite the stellar growth. Yes, eBay owns a piece of MercadoLibre, but don't you deserve all of the growth?
* Gmarket (Nasdaq: GMKT): South Korea's leading website is smoking eBay in its home country. Now it has its sights set on Japan. As Baidu.com (Nasdaq: BIDU) -- the Chinese search engine giant that recently launched its service in Japan -- is finding out, it's not easy to crack a mature tech-savvy market like Japan. Thankfully, Gmarket is worth buying even if it sticks to South Korea. Earnings and revenue soared 55% and 35%, respectively, this past quarter. The stock is fetching 20 times next year's projected profits, which is a bargain for a high-margin growth stock with room to grow.
Is eBay going down? Not necessarily. But these other companies have the nimble legs and ridiculous upside that eBay presently lacks."
Wonder if John Donahue and Lorrie Whatchamacalit are listening?
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posted on June 23, 2008 12:07:52 PM new
Not one to defend eBay, but just about all stocks (and other non-equity assets) have been in the dumpster lately, with the exception of a few commodity-related stocks.
My wife and I are relatively diversified (stocks, bonds, domestic, foreign, etc.), and it's a sea of red.
posted on June 23, 2008 02:15:52 PM new
I can understand them crunching the numbers and dropping eBay, but investing in bidz.com? Why not just invest it in some faux pearl and cubic zirconia earrings?
Ebay may flounder, drop and rise, but it ain't going away anytime soon. In spite of everything, it is pervasive and diversified, and now part of the mainstream marketplace. Stuff like bidz.com (and some of the others) will just sink to the bottom, never to be heard from again.
BTW, although not a jewelry freak, I did go to check it out. I loved the listings "Compare at $xxxxx". One ring, 10K gold, 12 diamonds totaling a whopping .5 carat! Retail value: over 5,000 - yeah, in your dreams.
posted on June 23, 2008 02:44:45 PM new
bidz built its business on being touted by analysts and pundits, so you be the judge on this recommendation.
bidz pays large commissions to websites and bloggers.
There are recurring rumors that bidz shills its own auctions. That's the problem with selling your goods by auction on your own site -- it leaves you open to speculation. The fact that retail prices are grossly inflated doesn't help their credibility.
I'm in the process of removing bidz ads from my own website. I don't want to be associated with them.
Keep in mind that folks who write for a living have to write about *something*, so why not dump on eBay? Everyone else is. (Not that it isn't richly deserved.)
posted on June 23, 2008 03:48:19 PM new
Well,you can tell how desperate Ebay is when it called the bidders who get neg and neutral CREAM OF THE CROP BIDDERS!
*
Google does not hire stupid people.
posted on June 24, 2008 09:23:57 AM newWell,you can tell how desperate Ebay is when it called the bidders who get neg and neutral CREAM OF THE CROP BIDDERS!
