Look for eBay (EBAY) to more than hold its own this holiday season, which is one major reason I'm reiterating my buy rating for the company, first recommended on May 14, 2009, at a price of $16.84. If you bought EBAY in May, you're up about 40%.
Earlier this year, eBay sold a 70% stake in Skype for about $2.75 billion, enabling the company to focus on core operations at eBay and at PayPal.
More recently, eBay resolved selected search function issues. No one should doubt the earning power of eBay's core: the company's auction site boasts more than 89 million active users. Talk about reach! Look for a 1% to 3% revenue gain in FY2009, followed by a solid 10% to 12% revenue gain in FY2010. The First Call FY2009/FY2010 EPS estimates for EBAY are $1.54 to $1.62.
Technically, eBay's stock chart cleared $20 psychological resistance, then sold-off despite a Q3 earnings per share result that beat the consensus estimate. That suggests that end-of-the-year profit-taking by institutional investors started a little early with EBAY. Hence, view the pull-back as an opportunity to add to/establish a position. eBay will likely trade above $35 by the end of 2010.
Stock Analysis: eBay is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in EBAY now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your EBAY position before December 2009. Sell/stop loss if you were to buy shares in this company: $7.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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