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Eric Bleeker: I'm Eric Bleeker. I'm joined here with Austin Smith, and we are running down some picks from co-founder David Gardner. I guess you could call him a superinvestor when you look at the track record, beating the market by almost 100% with his Stock Advisor picks over the past decade.
One of those picks is eBay, which goes all the way back to 2002. It's a much different company than in 2002. It's been quite a run, but let's look at the other side, the bear side. What are three reasons right now that you'd look at selling eBay?
Austin Smith: Full disclosure, Eric, I am an eBay shareholder, but I believe that this is just kind a valuable exercise that everybody should go through. You have to look at both sides of the investing coin here.
When it comes down to eBay, some of the things I'm looking at ... they put a big bullseye on Amazon in a way that kind of scares me. They've shifted their marketplace segment to a fixed auction format, which is much closer to the Amazon model.
Amazon's not a company you want to agitate. Previously, eBay occupied with their marketplace this niche that Amazon was unlikely to touch, but now -- when you go to this fixed auction format, you start doing same-day shipping, you start making partnerships with Best Buy and Radio Shack -- you're moving heavy into Amazon's camp, and Jeff Bezos is not a guy I want to go to war with.
The second reason to sell, their other growth engine, the mobile payments space, is heating up in a serious way.
You've got serious competition from Square, even Intuit is going to have their own swipe feature that's going to sync up with all their QuickBooks products. You've got Google getting in on the game, you've got the Merchant Exchange Network, which is a consortium of big retailers like Wal-Mart that are having their own mobile payments offerings.
There's high growth in this space, and eBay, with their PayPal division, no doubt one of the first companies to get into it in a big way and really profit from it, but that's attracted a lot of competition from, frankly, companies with deeper pockets than eBay.
Eric: Yeah. I think that's what you have to look at. You mentioned Amazon. The marketplace idea is not quite as attractive, from a high level. You don't hear people talk about getting "eBay Prime" or something. But it is the PayPal thesis that's really brought them along.
Here's the deal. eBay right now -- I'm looking at it at this moment -- a P/E of 17.9. Well, we can look at an Apple, down below 12 in the technology space. You look at some of the other deals around, a lot of technology companies are trading very cheaply.
You even look at a Microsoft or an Intel, in that adjusted around 10 P/E ratio. Why should investors go for eBay, at 18X? I think that, in and of itself, is a reason to sell, just because the valuation is a little higher.
Austin: Yeah, there's an opportunity cost with every investment you make, and if eBay is a little more expensive and their growth is a little slower than other big, more established tech companies, why not take the safer, cheaper bet that also has higher growth?
Eric: Yeah. To their credit, they have kept the growth up, but if that PayPal engine were to flare out for any reason, look out below.