Price hikes? CEO Meg Whitman isn't just trying to raise revenue; she's trying to thin out low-margin eBayers who undercut the power sellers who really drive growth for the auctioneer. If anything, eBay is making a short-term sacrifice that should boost margins over the long term. Tell me again why that's a problem?
And let's talk China. eBay hasn't abandoned the Sino superpower. Instead, it's creating a joint venture with fellow Motley Fool Stock Advisor selection TOM Online (Nasdaq: TOMO ) . That's the same approach that Yahoo! (Nasdaq: YHOO ) has taken in Japan to great effect. But that can't be a surprise; management gurus have for years been telling executives to focus their companies on what they do best and outsource the rest.
Valuation isn't a problem, either. Yes, a trailing multiple of more than 40 looks bad. But the nature of trailing multiples is that they look backward instead of forward. eBay trades for 24 times next year's projected earnings. That's at worst reasonable for a company with a history of 20%-plus annual earnings growth and a massive addressable market.
Besides, by my math, eBay is valued today as if its current free cash flow ($1.63 billion), discounted at 11%, will grow by just 13% for the next decade and 3% thereafter. You call that expensive, Chuck? I don't, especially when analysts expect eBay to boost its bottom line by 21% a year through the end of 2011.
Perhaps that's why at least one value guru -- Mason Hawkins of Longleaf Partners -- has been buying eBay on dips and is already up 17%, according to Gurufocus.com. He's no trader, either; Longleaf turns over just 7% of its portfolio annually.
Chuck's right; eBay is in a period of transition. But even the numbers favor its valuation, which means this debate comes back to the question I asked in the opener: What are the chances that the world as we know it today can do without eBay?
You know the answer, of course. So do thousands of other investors. They're the ones still happily holding eBay shares.
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Fool contributor Tim Beyers, ranked 1,366 out of 18,477 in Motley Fool CAPS, didn't own shares in any of the companies mentioned in this story at the time of publication. Get the skinny on everything Tim is invested in by checking his Fool profile. The Motley Fool's disclosure policy isn't for sale.