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No. of Recommendations: 7
Normally I would not invest in high tech--I worked there too long.
The value proposition is rarely present, and when it is, it's usually overpriced.

But here's a thought: Ebay may be a good value investment soon.
Certainly value is much better than it was.

Consider:
Since March 2000, the stock has returned 0.50%/year on a compounded basis.
Meanwhile, on a per-share basis:
Revenues have gone from .40 to 5.50
Cash flow has gone from .08 to 1.70
Earnings have gone from .04 to 1.10
Book value has gone from .94 to 8.90
Operating margin has gone from 18.2% to 34%
Return on equity has gone from 4.8% to 12.5%
Net profit margin has gone from 11.2% to 20.2%

Rate of growth is still >30% on most metrics, depending on the lookback you use.

These are all per-share figures, but number of shares outstanding has
only recently peaked, and they're now in the first couple of years of
what will probably be a very long term buyback program, since they have
no debt and just can't invest all the money they make quickly enough.

As for economic moats, a lot of their recent expansion has been outside their
core franchise, which is a shame. But their auction business is an impregnable
bastion, the one they use as an example in business schools. Plus, the
Paypal business has some moderate network-based moat value as well.
I would take their long term prospects ahead of those of Google any day,
since there is nothing that Google does that couldn't be copied.

Warren Buffett would steer clear. But, it may be starting to look like a
reasonable deal, though not quite at current prices. Price is $33 right
now, or about 30 times current year's earnings. This is much
higher than I would ever normally consider, but even this might
conceivably make sense. They are still growing very fast within
their franchise
, and doing it while undergoing negative dilution--
they are not raising any new capital to achieve the growth.
This fast growth will end, of course, but the prospects are that even
then they will maintain outsize sustainable margins for a very large
number of years thereafter, which should accrue to the shareholders.

To me, it looks like a good long term value company, if it could be
bought a little cheaper than the current still-rich price.
The 52-week low was 25.50, a point at which it might be worthwhile.
If the market tumbles suddenly at some point, this is a company whose
price I might check--I'd certainly be a buyer at the right price.
Crazy, but not utterly crazy.

Jim
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