Sell Your eBay Inc. Stock Now! Then Get Back In At...
I'm often labeled as anti-eBay, but that isn't the case. In recent discussions on the Google Finance discussion board for eBay, myself and other eBay users have been presenting the case for a pending dive in the share price of eBay stock. As I write this, the stock is down another $.45 in pre-market trading. eBay is not a good long-term investment, period. Management would have you believe that it is, but their actions speak so much louder than their words. So, now that I've been labeled an "eBay hater" and after it has been suggested that I write about eBay only for personal gain....I will now offer some advice or at least insight. Please though, don't just go dump all of your eBay stock without first reading what I have to say. Think about what I say, and then you - as an investor - make up your own mind.
Many investors trade eBay stock for the short-term. If that fits your profile, you probably last bought into eBay big in January around the time that eBay issued their annual report, give or take between $28.62 and $32.45. Currently the stock has slid down to $31.41 from a high of $33.99 in mid-February. This slide seems to be due to the recent Vladuz hacking and Prosperpoint.com breaches, reactions to the Chinese market and the ongoing JK Rowling lawsuit against the company. Now we are still almost a month from the end of the quarter and a couple weeks away from when we'll start hearing whispers of eBay's current growth. The stock numbers are not what I want to focus on however, but rather more concrete statistics.
Historically eBay stock goes through a bit of a decline after Q1, and regains
a bit of ground during the pre-summer months. Then in summer the stocks
goes down. This is due in large part to simple societal tendencies (many
people would rather simply enjoy the nicer weather than surf eBay for new toys).
This graph shows a
marked seasonal dip in listings (or at least a slowdown in growth in 1999 &
2000) during the summer months. Over the past few years, this decrease in
listings on the site has become accentuated with the decrease more acute and
also beginning much earlier in the year. The slowdown has already begun in 2007.
Another harbinger of bad news concerning the stock in the next month is the site traffic.
This chart shows
eBay's falling traffic. Currently eBay is at a low not seen since sometime
in 2001 for percentage of internet traffic. eBay was recently passed by
Wikipedia in amount of daily traffic and is in a battle with Blogger, trading
spaces daily as to which site is ranked higher. ebay continues its slide today, but
the most telling thing about the traffic chart is the starting point. Each
of the past five years, eBay has seen their traffic tumble slightly during the
summer months, but this year, eBay is starting 2007 in the basement.
So why exactly do we think that now
is the time to sell? Based on the current trend in eBay share price, we
feel the slide will continue for a bit. eBay management is perennially
more concerned about stock price than they are about pretty much anything else -
and maintaining growth to keep stock price from bottoming out more specifically.
Over the next few weeks, look for eBay to pull some magic listing fee sales from
their hat. CEO Meg Whitman is an expert at crafting recovery from a bad
quarter in the last few weeks. Look for not just one listing sale, but a
series of listing sales that will be followed with press releases from eBay
within a day of the sale date. eBay will site y/y listing statistics for a
certain week, which are actually based on a week 52 weeks prior when there was
no listing sale. Analysts (especially and undoubtedly Prudential for one)
will praise the efforts of management for growing the company at an enormous
pace y/y, especially in the US and Germany. This should result in a short
uptrend in the price of eBay or will at least level off any slide in stock
From there, eBay will likely offer
more promotions near the end of March. Most likely these promotions or
sales will offer discounts on eBay services, however they are usually billed at
full price with rebates given sometime in April. This usually brings in a
huge influx in revenue for a very short period of time, but long enough and in
enough volume to propel eBay to yet another quarter of maintained growth.
If history repeats itself this quarter, short term investors should get back in
before right before listing sales are offered up to the point when news of
eBay's Q2 numbers is being released. The Q2 numbers should also show more
Skype revenue growth, based on more users signing up for yearly subscription.