General Musings

This section is where you'll find my thoughts on life from the eyes of an entrepreneur.  The biggest challenge is balancing the success and obligations that success brings as the more successful one becomes, it seems the more obligations they have to the world.  Feel free to comment as you follow my journey and general musings regarding that journey. 


General Musings on Life & Entreprenuership

Don't Forget about eBay for Multiple Reasons

(12/08/2020) Mark A. Cenicola

Amazon and major retailers like Walmart, Target and Best Buy are rapidly expanding their online sales. Newcomers like Etsy and Shopify are enabling small merchants to reach more customers online. With the massive growth of ecommerce, it’s okay if you may have forgotten about eBay, the OG online marketplace where buyers and sellers have gathered together for more than two decades to sell their wares.

Because the stock price had languished, eBay attracted activist investors who begged it to spin off Paypal, which it had acquired several years earlier. They argued that significant share price appreciation would occur and occur it did…for Paypal. $PYPL currently trades at over 50 times earnings while $EBAY trades around 15x. 

You could argue that PayPal is growing faster than the old eBay, at about 25% in Q3 2020, but that’s not any faster revenue growth than eBay for its 3rd Quarter of 2020. Both PayPal and eBay are expecting similar revenue growth going forward. So why does eBay trade at such a low earnings per share multiple?

Now that you know, the better question is, “Why aren’t you buying as much eBay stock as you can? 

The easy answer to both is that amongst the FAANGMTs (Facebook, Amazon, Apple, Netflix, Google, Microsoft, Tesla to name only a few considered part of that bunch), eBay has simply been forgotten, kind of like Yahoo! was before its eventual asset spinoff and sale to Verizon. It’s not a shiny new money burning company that recently went IPO like Snowflake or Palantir and it’s not a meme stock like AMD or a reverse merger SPAC like Virgin Galactic.

No, eBay is a boring massively profitable and steadily growing company with a strong balance sheet. It’s a business that’s gone through many different CEOs over the years, but despite that, continues to generate strong results. Its spinoff of non core businesses like Stubhub and soon to be classifieds business, shows that it’s focused on its bread and butter money maker core marketplace. That gives it the ability to pay a reasonable dividend and hopefully grow it, while being able to afford repurchasing shares at the same time (even though I’m not a fan) without having to take on massive debt to do so.

You could argue eBay is exactly the type of company Warren Buffett would buy.

It’s easy to believe eBay is way undervalued. Where else can you find a profitable, growing tech company with a great brand and strong balance sheet that pays a dividend for less than 20X EPS? This should easily be trading at 30X EPS because of its 20% + growth rate alone. That would put the value of the stock at $100/share today and even more once the growth occurs.

Growth may even accelerate because eBay is rolling out its own payment platform allowing it to keep even more of the value from each transaction on its marketplace. They’ve only converted a small amount of their current U.S. customer base over to their payments platform. If growth accelerated to 30% it’s not unreasonable to see it trade at 45X EPS giving the company a $150/share valuation and bringing it inline with other fast growing tech companies.

Another reason not to forget about eBay doesn’t directly have anything to do with its stock. It’s so easy to turnover items you have hanging around the house. We all have those items we don’t use, but don’t want to throw away because they’re worth something. I’ve personally been a seller of items on eBay for more than 20 years! I’m not a power seller, but use it as an opportunity to sell items I don’t really use, but would rather not throw away. 

Its marketplace is still the best at allowing you to liquidate a wide range of goods quickly, easily, and safely. $10 here, $20 there, maybe even a few hundred dollars on a sale, makes it perfect to pick up a few extra dollars spendable on something more useful without having to hold a yard sale. On the buying side, especially, If I don’t mind buying something used, I certainly check eBay because the item there will be super cheap compared to buying new. Plus, it’s enjoyable buying items using the money from items I recently sold.

Overall, eBay has been a great company to use as both a buyer and seller on its marketplace over the years and looks to be a great investment opportunity over the long term. At around $50/share, grab as many as you can. If you play options, look to LEAPS of a year out or longer for maximum potential.

One Sheet

Mark Cenicola strips away the hype and gives his take on technology and its use in establishing a better business online.

Hard hitting presentations that really get to the core of today's technologically advanced business economy, Mark demonstrates effective strategies for integrating the Internet into a company's operations and giving their website an expanded role in contributing to the success of their business.