EBAY

Newsletter Portfolios: Altria Ups Dividend; eBay Still Assessing PayPal Spin-off

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Valuentum makes two actively-managed portfolios available to members: a Best Ideas portfolio (housed in the monthly Best Ideas Newsletter) and a Dividend Growth portfolio (housed in the monthly Dividend Growth Newsletter). Each portfolio has a different goal and a different strategy. The Best Ideas portfolio seeks to find firms that have good value and good momentum characteristics and typically holds each idea from a Valuentum Buying Index rating of a 9 or 10 (consider buying) to a rating of a 1 or 2 (consider selling). The goal of the Best Ideas portfolio is to generate a positive return each year and to exceed the performance of a broad market benchmark. The Dividend Growth portfolio seeks to find underpriced dividend growth … Read more

Amazon Drops $40 Per Share

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Amazon (AMZN) continues to focus on taking market share and damaging its competitors rather than generating large accounting profits and cash flows. The company’s cash-flow generation should improve if investments turn out to be profitable (and management turns off the expense gushers), but the company remains a low-margin retailing operation. The market has recently grown impatient with the executive suite’s lack of profit focus, and reaction to its second-quarter results, released Thursday, couldn’t have made this point more clear. For a company that boasts a market capitalization of ~$146 billion, one would think the firm is highly profitable. For Amazon, however, this just isn’t the case. We explain why the firm garners such an elevated valuation (despite meager profits) in … Read more

eBay is One of the Cheapest Stocks on the Market

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A data breach and a Google (GOOG) search algorithm change were key concerns heading into June for eBay (EBAY), but the firm’s same-store sales pace during the month showed that little could stop the fundamental momentum at the online retailing giant. Though the pace of its same-store sales expansion may never reach the breakneck rate of Amazon (AMZN), we prefer eBay’s profit focus and believe its competitive advantages are as strong as–or even stronger than–Amazon’s. Here is the June same-store sales data from ChannelAdvisor (ECOM): Amazon – Amazon’s June SSS came in at 34.4%, an increase compared to May’s 28.1%. The Amazon Fire Phone was announced in June and could have caused some knock-on effects. eBay – eBay’s June came … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Assessing Materiality of 5 Relatively Poor Incremental Data Points from eBay

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eBay (EBAY) has one of the strongest business models on the market today. The firm uniquely benefits from a network effect in its auction business and a secular trend toward consumer online consumption in its payments business, PayPal. Recent same-store sales performance has also been solid, albeit slowing, in recent periods. According to ChannelAdvisor same-store sales growth at eBay came in at 11.5% in May, down from 14% in April. eBay retains a vibrant Economic Castle. Before we start walking through the five relatively poor incremental data points from eBay, we need to make a couple things clear. First, we hold eBay in the portfolio of our Best Ideas Newsletter, and we do not expect to make any changes to … Read more

Earnings from 3 Internet Giants: eBay, Facebook, and Twitter

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By Brian Nelson, CFA We often receive questions about our methodology. For our new members, the Valuentum style has three distinct components: a discounted cash flow assessment (intrinsic value calculation), a relative valuation assessment, and a timeliness assessment. We’ll focus on the first pillar in this article. The Valuentum process is grounded in financial statement analysis, where our analyst team derives the ValueCreation, ValueRisk, and ValueTrend ratings of a company. Together, these ratings provide a quantitative and objective assessment of the strength of a firm’s competitive advantages, or in Warren Buffet’s terminology, the firm’s economic moat. To derive the ValueCreation rating of each company, the Valuentum team compares a company’s return on invested capital (ROIC) to its estimate of its … Read more

eBay’s Same-Store Sales Are Accelerating

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No longer is eBay (EBAY) a simple auction website. With PayPal, eBay has become an Internet commerce powerhouse and an impressive, hard-to-duplicate payment platform. If this weren’t enough to get investors excited about the company’s stranglehold on the Internet, Carl Icahn is taking some major steps to coerce the market to recognize eBay’s true intrinsic value. The activist guru is encouraging management to conduct an initial public offering (IPO) of PayPal, a move that we think will unlock shareholder value. We’ve seen companies spin off subsidiaries many a time before, the most recent planned offering is Yahoo (YHOO) and Alibaba, for example. Yahoo has performed wonderfully in light of the monetization and increased liquidity of its investment in Alibaba, and … Read more

Focus on a Rules-Based Process Not on Short-term Outcomes

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By Brian Nelson, CFA …you should be skeptical of what investment advice you use and who your sources are. (Investment gurus) give…seemingly solid advice in (their) columns, but (as) it turns out (their) stock picking skills don’t translate so well into the mutual fund industry… …Part of the problem is that you have no idea what they’re actual track record is or the conviction they hold on each recommendation they put out there. The talking heads have no idea what your risk profile and time horizon are. There’s a huge disconnect between financial predictions you read about or see on TV and your personal circumstances. That’s why it’s so important to focus on a rules-based process instead of short-term outcomes. It … Read more

Carl Icahn Wants eBay to Spin Off PayPal in an IPO

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CARL C. ICAHN RELEASES STATEMENT ON EBAY (EBAY) IPO 20% of PayPal We believe eBay could easily conduct an Initial Public Offering of PayPal, selling 20% to the public. eBay would retain 80% of PayPal with control. Before the transaction is consummated the companies could enter into a long-term, commercially viable contract, preserving all synergies. This type of relationship is customary in partial IPOs and would be particularly important for eBay as currently, outside of PayPal, there does not exist a global payment processing solution competent enough to service eBay’s users. Luckily for PayPal, competitors such as Google, Apple and many others do not yet have the same comparable scale and product offerings. (source) Valuentum’s Take There are a variety … Read more