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Earnings 'Miss' Is Your Time To Buy
http://seekingalpha.com/article/1560712-ebay-earnings-miss-i...


On July 17, eBay (EBAY) reported its most recent quarterly numbers to the public, and proceeded to get crushed in the next market session. The stock traded down more than 6% on an EPS number one cent below analyst expectations and guidance near the low range of their projections. This shareholder reaction to a very minimal earnings miss in an otherwise solid quarter shows a potential opportunity to step in and start a position in eBay.

The company has a strong track record of growth in the past, both from an expanding online marketplace and a growing impact from PayPal and its extensions. eBay also has large insider ownership and upcoming catalysts that could help drive earnings and share prices up over the medium and long term. Buyers who have been looking for an entry point should take this opportunity to go long a popular tech stock that has more factors in its favor than its recent performance would suggest.

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One of eBay's strengths as an attractive investment is the number of shares owned by eBay executives and employees. High insider ownership in a company is a very bullish sign because it shows that the people who are responsible for the company's success have a vested interest in the performance of the stock. eBay's insider ownership currently stands at over 10% of the company, which means that insider interest is very similar to the interest of shareholders. CEO John Donahoe alone has over 511,000 shares in the company, which amounts to over $26 million of his own wealth riding on the success of eBay.

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Looking forward in eBay's future, there are a couple factors that can contribute greatly to the company's bottom line. The largest potential growth opportunity for eBay is its alliance with Discover (DFS) to provide PayPal services to thousands of small businesses nationally. By the end of 2013, eBay expects PayPal to be accepted as a form of payment in over 2 million stores through their partnership. This will increase PayPal's store presence by a factor of eight by the end of the year, which could mean an explosion of growth in cash flows coming from the increased traffic in physical commerce, not just online transactions. This partnership shows that PayPal is tightening its grip and expanding its reach into mobile payments with businesses and customers, which will provide a larger and larger income stream for eBay's balance sheet.

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As the United States economy starts to steadily show signs of progress, consumers and businesses will start to venture out and spend more money. eBay has positioned itself to benefit greatly from this surge in transactions, and has enabled people to buy and sell faster and easier than ever. This advantage will help the company secure more customers and partners to raise its profits and its share price. The drop on July 18th was a momentary hiccup, one that should be met with enthusiasm, not panic. Buyers can now pick up a fast growing company at a reduced price and can see the outsized returns over the coming months. Investors will see the extraordinary growth of both eBay's online marketplace and PayPal's financial service and pay up to have a piece of the success. With management motivated to succeed and an eager customer base willing to use its services, eBay has a bright future ahead.
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