This morning, I’ll be closing one of my two remaining 2014 long & short tech stock picks. Why? At this point, I can no longer support holding eBay. Why?
Valuing eBay as a Bank?
For years, I’ve been saying that I value eBay as a bank. Why? Mostly because I’m not a big believer in its “online auctions/store” business. There is very little growth left:
Really, the growth is in its payments business:
That left a lot of “unlocked value”. But when eBay finally confirmed it was going to spin out Paypal, the stock reacted:
I’d argue that while not all of that value has been unlocked certainly a decent portion has.
Paypal Is In An Increasingly Bad Position
Two or three years ago, Paypal was the dominant payments player. That may still be the case but with leadership focused on irrelevant initiatives such as advertising networks, same-day shipping (which the company is now stopping), it wasted time and resources that could have been much better spent on payments.
Now, Paypal finds itself in a defensive position as it tries to fight off Apple Pay (already the clear leader), Google wallet and other initiatives by established and new players. Even worse is the clear trend where Paypal is losing momentum….
Look at this Google Trends and I would bet that 1-2 years from now, it will look very different:
I personally struggle to see much in terms of optimism when I look at $EBAY these days. The growth is slowing,The company has been so paralysed that it’s been unable to adapt fast enough to position itself . The payments (both offline and online) scene looks like it will be dominated by a few players led by Apple Pay, Google Wallets with a few outsiders like EBAY, McX and Square now looking like they’re in trouble. Of course, it’s still very early and there’s certainly a chance that Paypal could turn it around but I don’t see anything that leads me to believe that is likely. Private company Stripe, through alliances with Apple, Alipay is clearly stealing much of Paypal’s platform with developers.
In the end, eBay no longer is a good opportunity at these levels and for now I prefer staying out of the stock
Disclaimer: Long eBay (EBAY, Financial) which will be closed on today’s opening
