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Thinh TranTu NguyenJohn KoongNaco Chen
George Chou
eBay’s mission is to build the world’s most efficient and
abundant marketplace in which anyone, anywhere, can buy or sell
practically anything.
History eBay Inc. was formed as a sole
proprietorship in September 1995 and was incorporated in California in May 1996. In April 1998, eBay reincorporated in Delaware and in September 1998 eBay completed the initial public offering of their common stock.
Present
As of December 31, 2003, through wholly owned and majority-owned subsidiaries and affiliates, eBay had Websites directed toward the United States, Australia, Austria, Belgium, Canada, China, France, Germany, Hong Kong, Ireland, Italy, The Netherlands, New Zealand, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan and the United Kingdom.
38th Richest person in the world with net worth of $5 billion according to Forbes
Founder & Chairman
Pierre M. Omidyar founded eBay as a sole proprietorship in September 1995. He has been a director and Chairman of the Board since eBay's incorporation in May 1996 and also served as its Chief Executive Officer, Chief Financial Officer and President from inception to February 1998, November 1997 and August 1996, respectively.
Officers & Compensation
Whitman, Margaret C………………………………President & CEOBannick, Matthew J. ………………………………………Senior Vice President and General Manager,
Global Online Payments and Chief Executive Officer of PayPal
Cobb, William C. …………………………………………….
Senior Vice President and General Manager, eBay International
Webb, Jr., Maynard G………………………………Chief Operating Officer Jordan, Jeffrey D…………………………………….
Senior Vice President, eBay North America
$2,191,976.00
$1,021,605.00
$753,591.00
$1,849,617.00
$1,298,928.00
Profile
eBay Inc. developed an Internet-based community in which buyers and sellers are brought together to buy and sell almost anything. The eBay online service permits sellers to list items for sale, buyers to bid on items of interest and all eBay users to browse through listed items in a fully automated, topically arranged service that is available online seven days a week.
Online Auction
REVENUE BY PRODUCT CATEGORIES
(by percentage)
MOTORS29%
COMPUTERS9%
CONSUMERS/ELECTRONICS
9%CLOTHING/ACCESSORIES
8%
MOVIES/MUSICS8%
SPORTS7%
COLLECTIBLES6%
HOME/GARDEN6%
TOYS5%
CAMERAS4%
INDUSTRIAL 4%
JEWELRY5%
J
$-
$10,000.00
$20,000.00
$30,000.00
$40,000.00
$50,000.00
$60,000.00
DO
LL
AR
S (
mil
lio
ns)
EBAY
AMAZON
COSTC
O STAPLES
BED BATH
& BEYOND
COMPANY
INDUSTRY COMPARISON OF RETAIL SPECIALTY MARKETS
MARKET CAPITAL
INDUSTRY COMPARISON OF RETAIL SPECIALTY MARKETS
EBAY46%
AMAZON17%
COSTCO16%
STAPLES12%
BED BATH AND BEYOND9%
Growth rates % (Strength)
Company Industry
S&P 500
Sales (Qtr vs year ago qtr) 58.70 27.80 11.20
EPS (YTD vs YTD) 92.10 NA 31.20
EPS (Qtr vs year ago qtr) 92.10 NA 31.20
Sales (5-Year Annual Avg.) 82.55 16.51 5.12
EPS (5-Year Annual Avg.) 109.17 NA -3.24
Dividends (5-Year Annual Avg.) NA NA 1.71
Price RatiosPrice Ratios (Strength)
Company Industr
y S&P 500
Current P/E Ratio 82.1 NA 21.3
P/E Ratio 5-Year High NA NA 64.8
P/E Ratio 5-Year Low 49.6 NA 16.5
Price/Sales Ratio 19.12 4.73 1.49
Price/Book Value 9.67 5.64 2.91
Price/Cash Flow Ratio 71.60 89.90 12.70
Profit Margins % (Strength)
Compan
y Industr
y S&P 500
Gross Margin 87.8 54.3 48.0
Pre-Tax Margin 29.3 1.2 10.9
Net Profit Margin 23.7 -1.9 7.2
5Yr Gross Margin (5-Year Avg.) 86.9 53.2 47.5
5Yr PreTax Margin (5-Year Avg.) 27.6 -66.6 9.2
5Yr Net Profit Margin (5-Year Avg.) 17.7 -66.7 5.6
Financial Condition (Strength)
Company
Industry
S&P 500
Debt/Equity Ratio 0.00 0.22 1.23
Current Ratio 2.8 2.4 1.5
Quick Ratio 2.4 2.2 1.0
Interest Coverage 119.9 2.0 3.3
Leverage Ratio 1.2 1.7 6.0
Book Value/Share 8.15 3.03 11.77
Investment Returns % (Weakness)
Company
Industry
S&P 500
Return On Equity 12.0 NA 14.2
Return On Assets 9.9 -1.3 2.4
Return On Capital 12.0 -1.8 6.3
Return On Equity (5-Year Avg.) 7.2 NA 12.1
Return On Assets (5-Year Avg.) 6.1 -30.2 2.0
Return On Capital (5-Year Avg.) 7.1 -42.3 5.7
Management Efficiency (Strength)
Company Industr
y S&P
500
Income/Employee 113,000 -6,000 23,000
Revenue/Employee 475,000 310,000 315,000
Receivable Turnover 8.9 10.5 7.1
Inventory Turnover NA 25.3 7.9
Asset Turnover 0.5 0.7 0.4
Last Trade: 82.33
Trade Time: Jul 07
Change: 1.14 (1.43%)
Prev Close: 79.47
Open: 79.29
Bid: 46.61 x 100
Ask: 110.29 x 100
Day's Range: 77.92 - 79.37
52wk Range: 49.87 - 94.13
Volume: 6,410,703
Avg Vol (3m): 8,776,227
Market Cap: 51.49B
P/E (ttm): 82.11
EPS (ttm): 0.954
Div & Yield: N/A
Market Capitalization
Holding Period Return2004
(12/31) 2003 2002 2001 2000
Background Analysis:
HPR = Ending Price – Beginning Price + Distributions
Beginning Price 0.3421 0.90530.013
8 0.0136
Earnings growth
rate estimate
(2004) 0.5906
Dividend 0 0 0 0 0
Price 86.71 64.61 33.91 33.45 33
HPR 0.3421 0.90530.013
8 0.0136
(expected)
2004 2003 2002 2001 2000
NI 441,771 249,891 90,448 48,294
(+)Deprecitaion 159,003 76,576 86,641 38,050
(-)Capital Expenditures 581,751 161,907 166,323 49,753
(-)∆ in working capital 416,372 378,568 165,644 165,756
(+) ∆ in long-term debt 110,678 1,790 604 -3,614
FCFE -117,363 -286,671 -212,218 -154,274 -132,779
(Thousand) (Thousand) (Thousand) (Thousand) (Thousand)
Free Cash Flow to Equity
2004 2003 2002 2001
Beta eBay 1.5877 1.7072 2.7586 3.3931
Beta= COV(RIBM, RS&P500)/VAR(RS&P500)
Unlevered Beta 1.5112 2.5398
[Equity/(Equity +((1-T)Debt))]* BetaEquity=Beta_unlevered
Risk Analysis
2004(7/15) 2003 2002 2001
FCFE 12/31/2004 -117,363,107 -286,671,000 -212,218,000 -154,274,000
shares outstanding 657,400,000 649,293,000 311,277,000 277,259,000
G 12/31/2004 0.5906 -0.3508 -0.3756 -0.1619
P 7/15/2004 83.46 64.61 33.91 33.45
Ke(required return on equity) 0.5885 0.5878 -0.3780 -0.3985
Discounted Cash Flow Model
2004(7/15) 2003 2002 2001
Rf 0.0125 0.0102 0.0163 0.0386
Rm-Rf 0.0185 0.3206 -0.2261 -0.1511
Beta 1.5877 1.7072 2.7586 3.3931
Ke(required return on equity) 0.0419 0.5575 -0.6074 -0.4741
The company is currently underpriced because Ke( DCF model) > Ke(CAPM); 0.5885>0.0419
CAPM
Market Efficiency
June 23, 2004. Ebay announces the eBay solutions directory, a new online directory of software and services that supports trading activity on the World’s Online Marketplace.
WEAK FORM
June 3, 2004 OPEC announces oil production increase up to 2 million barrels a day in July 2004.
NO FORM
2003 2002 2001
We= Equity/(Equity+Debt+Preferred Stock) 0.8413 0.8803 0.8514
Wd=Debt/(Equity+Debt+Preferred Stock) 0.1587 0.1197 0.1486
Wp=Preferrd stock/(Equity+Debt+Preferred Stock) 0.0000 0.0000 0.0000
Ke 0.2400 0.1500 0.0900
Kd 0.2374 0.1081 0.0347
Kp 0.0000 0.0000 0.0000
WACC=We*Ke + Wd*kd*(1-T)+ Wp*Kp WACC 0.2278 0.1402 0.0792
Cost of Capital and Optimal Capital Structure
M&MeBay Capital Structure
0.1402
0.0792
0.2278
0
0.05
0.1
0.15
0.2
0.25
0.1 0.12 0.14 0.16 0.18
D/TA
WAC
C
WACC
Current Capital Structure
Equity
Debt
Industry Capital Structure
82%
18%
Equity
Debt
100%
Strengths
High growth Positive HPR Very low debt Under priced High profit margins
Weakness Return on Equity Beta slightly high
Expert Analyst
Conclusion
We recommend that investors BUY shares of eBay common stock
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