eBay

Inc. (NasdaqGS: EBAY)

Last Price: $55.88 VIEW: BUY

7/12/2013

eBay Inc. is a global technology company that enables commerce through three reportable segments: Marketplaces, Payments, and GSI. The Company by providing online platforms, tools and services to help individuals and small, medium and merchants around the globe engage in online and mobile commerce and payments, the Company can facilitate transactions. It has created an open source platform that provides software developers and merchants access to its applications programming interfaces, or APIs, to develop software and solutions for commerce. As of December 31, 2012, its Marketplaces segment had more than 112 million active users and more than 350 million listings globally, while its Payments segment had more than 122 million active registered accounts. In May 2012, the Company completed the sale of Rent.com. Effective July 4, 2013, eBay Inc. acquired 2ememain.be and 2dehands.be, providers of e-commerce retail services.

Sector: Services Houses Highlights: eBay Inc. is a global technology company that enables commerce through three reportable segments: Marketplaces, Payments, and GSI. The Company by providing online platforms, tools and services to help individuals and small, medium and merchants around the globe engage in online and mobile commerce and payments. The stock closed yesterdays trading session at $55.88. In the past year, the stock has hit a 52-week low of $38.06 and 52-week high of $58.04. The intrinsic value of the stock is higher Industry: Catalog & Mail Order

than the current price. EBAY has a market cap of $72.52 billion and is part of the Services sector. GROWTH AND BALANCE SHEET The company reported that it earned $677 million, or 52 cents basic earnings per share (51 cents diluted earnings per share), for the quarter that ended March 31. That's up from $570 million, 44 cents basic earnings per share (44 cents diluted earnings per share) the same quarter last year. Revenue increased 14.4 percent, to $3,748 million from $3,277 million, with sales increasing in every Business Unit. EBAYs consensus earnings forecast for the quarter ending June 2013 is of 52 cents to 57 cents per share. GAAP operating margin was 21.3 percent, compared to 19.9 percent in the first quarter of fiscal 2012. Cash flow from operating activities was $937 million, compared to $531 million in the first quarter of fiscal 2012. VALUATION EBAY PE stands at 27.13 above the industry average of 20.74 and above the S&P 500 average of 18.41. The company is currently trading above the preferable P/E ratio of 15x and over the last five years, the companys shares have traded in the range of 13.50x to 28.70x trailing 12-month earnings. EBAY's current Price/Sales of 4.99 is above the average of its industry, of 3.15. EBAYs head to head comparison to its main competitors shows that the company has better gross margin and operating margin, it is trading at lower P/E but a higher P/S multiples than the main competitors. The stock is currently trading 14% below its intrinsic value of $65.21 this suggests that the stock is undervalued at these levels. The beta of 0.74 implies lower volatility of the stock with respect to the S&P 500. eBay has not shown very satisfying earnings consistency over the last five. EBAYs earnings per share over the last five years have grown only by 8.08%.However, the current quarter earnings in comparison to the same quarter last year have grown by 18.20% which is well above the required level of 15%. EBAYs current price levels are only 3.7% below the 52 week high of 58.04, and the technical indicators are neutral. The majority of the analyst ratings are buy. EBAYs Total Debt/Equity is 21.39% which is very close to the required maximum and it is below the industry average. EBAY does not pay dividends. RECOMMENDATION for next 6 months: We initiate our coverage with BUY. The company has demonstrated positive neutral signs but the valuation is cheap at current price level. EBAY is up 9.57% year-to-date. Our overall score for ADSK is 7.64. For options trading we suggest: Buy the August 2013 call with a strike of 57.50 priced at $1.27 per contract Net credit to start: $1.27

 eBay Inc VALUATION Market Cap: Enterprise Value P/E PEG Ratio Price/Sales Price/Book Enterprise Value/Revenue Enterprise Value/EBITDA Dividend Yield Held by insiders NEWS and CALENDAR Thu, Jul 11, 2013 Proof That Amazon Continues E-Commerce Domination Thu, Jul 11, 2013 Amazon shares hit another record on strong sales data Thu, Jul 11, 2013 Amazon's Smartphone Could Be Smarter Than You Think Wed, Jul 10, 2013 Is eBay Destined for Greatness? Tue, Jul 9, 2013 Top Tech 'Buy'Stocks: Citi Analyst EBAY Strengths Worlds largest internet marketplace No strong direct competition Brand Payment system EBAY 72.52B 66.34B 27.13 1.32 4.99 3.43 Beta 1 Month Stock Returns Year to Date Stock Returns 1 Year Stock Returns 3 Year Stock Returns 52-Week Change 0.74 7.36% 9.57% 42.81% 175.40% 39.87% 25.49% 58.04 38.06 52.84 53.87

4.56 S&P500 52-Week Change 15.39 52-Week High N/A 52-Week Low 50-Day Moving Average 9.50% 200-Day Moving Average

EBAY Weakness Copycats increase due to technologies becoming cheaper to implement. Internet fraud, potential for litigations

 Competitor Comparison EBAY Market Cap: 72.52B Employees: 30,000 Qtrly Rev Growth 0.14 Revenue 14.54B Gross Margin 0.7 EBITDA 4.31B Operating Margin 0.21 Net Income 2.72B EPS 2.06 P/E 27.13 PEG 1.32 P/S 4.99

AMZN 136.42B 88,400 0.22 63.98B 0.25 2.71B 0.01 -87.00M -0.19 N/A 6.2 2.13

GOOG 305.30B 53,891 0.31 53.50B 0.58 16.81B 0.25 11.22B 33.42 27.53 1.36 5.71

OSTK 681.59M 1,300 0.19 1.15B 0.18 32.40M 0.01 19.65M 0.82 35.1 0.72 0.59

Industry 533.93M 1.18K 0.15 496.08M 0.32 11.60M 0.01 N/A N/A 22.96 0.95 0.85

Stock valuation model

The model rates stocks from 1 to 10, with 10 being the best using a system of advanced mathematics to determine a stock's expected risk and return. I am using different fundamental and technical factors in order to rank a stock. Intrinsic value of the stock Investors should buy stocks selling at a discount to their intrinsic value, and then patiently wait for the fair value of their investments to be realized. EBAY Intrinsic Value EPS ttm EPS Growth (Assumption) PE DIVIDEND PAYOUT EXPECTED STOCK RETURN in 2022 Forecasted Stock Price Earnings Per Share after the 10th year TOTAL DIVIDENDS Forecasted Stock Price in 0.00 138.98

2.06 1.10 27.13 0% 1.08

138.98 5.12

Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 TOTAL EPS

EPS 2.26 2.47 2.71 2.97 3.25 3.56 3.90 4.27 4.68 5.12 35.17

2022+DIVIDENDS Net Present Value 65.21

EBAYs intrinsic value is $65.21 the current price is $55.88, the stock trades 14% below its fair value. The Sensitivity analysis of the stock varying the growth rate of the EPS are presented in the table below. EPS Growth (Assumption) 7% 8% 9% 9.54% 10% 11% 12% Based on the prospects of the company the valuation range is from $51.59 to $81.45. Financials The financial health of the company the higher the better, we evaluate all the financial ratios of the company. Sentiment Investors sentiment for the stock. Analyst ratings The model assigns a value according to analysts recommendation for the stock. Analyst rating on Reuters.com is 18 Buy, 15 Outperform, and 6 Hold. Earnings Consistency We are searching for EPS numbers that are better than the previous year's. One dip is allowed, but the following year's earnings should be higher than the previous year. EBAYs annual EPS for the last 5 years were 1.37, 1.85, 1.38, 2.50, and 2.02 this type of earnings action is not favorable. Total Debt/Equity The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry Value 51.59 56.62 62.08 65.21 68.02 74.46 81.45

EBAYs Total Debt/Equity of 21.39 is very close to the required maximum and is below the average for the industry. EPS This Quarter VS Same Quarter Last Year The EPS growth for this quarter relative to the same quarter a year earlier is above the minimum 15% that this model likes to see for a "good" growth company. Stocks with improving earnings are worthy of your extra attention. EBAYs EPS growth for this quarter relative to the same quarter a year earlier is 18.20% above our target. Annual Earnings Growth This stock valuation model looks for annual earnings growth above 12%, but prefers higher than 20%. EBAYs annual earnings growth rate over the past five years is 8.08%, below our target growth rate. Current Price Level Investors should keep an eye open for stocks that are trading within 10% of their 52-week highs, as it is likely to continue in its upward trend. EBAY's 52 week high is $58.04 current price is $55.88, is 3.70% below the 52 week high. P/E Ratio The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which in this model states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. The company has a P/E ratio of 27.13 the average industry P/E ratio is 20.74 and is above the S&P 500 P/E ratio of 18.41. Insider Ownership When there is strong insider ownership which we define as 8% or more, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders. Insiders own 9.50% of EBAY stock. Management's representation larger than the required minimum. This does satisfy our minimum requirement; companies that pass this test are more attractive to our valuation model. Technical Analysis

The model is using several technical indicators (MACD, RSI, MFI, OBV, position Indicators) to forecast the trend of the stock for 6 and 12 months, and assign a value. EBAY is trading in the range of $50.09 - $55.88 in the past 30 days. The stock has been showing support around $51.60 and resistance in the $53.50 range. The stock is trading above the 50-Day Moving Average and 200-Day Moving Average. RSI(14): 66.44. From the graph on page 1 it can be seen that the stock has been in an upward trend from July 2012 until February 2013, and since then EBAY is trading in a range from $50 to $57. The current price is approaching the top boundary of the range. Our indicators give a neutral view on EBAY. eBay Scorecard COMPANY: Intrinsic value o f the stock Financials Sentiment Analyst ratings Earnings Consistency Total Debt/Equity Quarterly EPS change Annual Earnings Growth Current Price Level P/E Ratio Insider Ownership Technical Analysis SCORE RECOMMENDATION:

EBAY
9 6 9 9 4 8 9 4 8 4 9 5 84 7.64 BUY