At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we'll be tracking the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

Sell it now!
Grand news for eBay (NASDAQ:EBAY) shareholders today: Collins Stewart hates your stock. In a note issued just this morning, the Wall Street banker declared the end to eBay's five-week run-up in stock price, and advised investors to sell the stock.

The reason, in case you're wondering, has little to do with reports also out today that eBay will buy a 34% stake in Gmarket (NASDAQ:GMKT). Rather, Collins seems to be making a pure valuation call. Pointing to eBay's 50% rise in stock price over the past month, and saying it sees "no signs of fundamental improvements" that would justify the spike -- Collins argues that eBay is losing market share to rivals, such as Yahoo! (NASDAQ:YHOO) and (NASDAQ:AMZN), and encountering "gross margin pressure." Collins believes the shares are overpriced, plain and simple.

 I disagree.

Let's go to the tape
Before I tell you why, allow me to give props to Collins Stewart. This analyst may have a lousy record for accuracy (Collins gets about 45% of its guesses right), but on those occasions when Collins wins, it sometimes wins big:


CS says:

CAPS says:

CS's Pick Beating S&P By:

Shanda Interactive (NASDAQ:SNDA)



267 points (NASDAQ:SOHU)



145 points

EP Medsystems


Not rated

125 points

A handful of multibaggers like Shanda and Sohu, incidentally, explain how Collins Stewart has managed to outperform the S&P 500 by an average of three percentage points per pick. When you don't make a lot of recommendations (and with only 158 stock picks made public over the last couple of years, Collins is one of the more taciturn analysts on the Street), a few big winners can tilt an otherwise unremarkable record solidly into the green.

I just happen to doubt that selling eBay is going to be a winning play. Here's why:

eBay's cheap
In two words, that basically sums up my buy thesis on eBay. Generating cash at the rate of $2.3 billion per year, eBay's enterprise value sits at barely seven times its trailing free cash flow (FCF) -- yet most analysts expect the firm to grow its profit at nearly 12% per year over the next half decade.

For its part, Collins predicts that 2009 revenue will actually drop 8% to $7.9 billion... but then bounce right back to $8.5 billion in 2010. (Note that Collins explains its short-term pessimism by pointing to the end of eBay's collaboration with Microsoft (NASDAQ:MSFT) on the "Live Search" cashback promotion.) But even if Collins is right in the ultra-short term, it appears to be thinking along the same lines as the rest of the Street long-term -- that eBay will keep on growing. That's what I'm thinking as well.

Foolish takeaway
Leave aside eBay's stake in craigslist. Net out the firms' sizeable cash cache, and even this morning's news of eBay's landgrab in Korea. You simply don't need to go digging around for all these "hidden treasures" at eBay in order to come to one, inescapable conclusion:

At seven times FCF and 12% growth, eBay's cheap as all get out. How Collins Stewart can miss this fact is beyond me -- but don't you make the same mistake.

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eBay and Microsoft are Motley Fool Inside Value selections. Gmarket, Shanda Interactive, and are Rule Breakers recommendations. and eBay are Stock Advisor recommendations.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 303 out of more than 130,000 members. The Fool has a disclosure policy.