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 track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.
And speaking of the best ...
Sometimes, life just ain't fair -- a truism that eBay
What's behind the lack of enthusiasm over eBay? It may have something to do with the quality of the analysts boarding the eBay train. Consider the case of UBS. While undeniably expert in certain "techie" fields -- such as Biotechnology, where its controversial recommendation of stem cell researcher Geron
|
Stock |
UBS Says |
CAPS Says |
UBS's Picks Beating (Lagging) S&P by |
|---|---|---|---|
|
Yahoo! |
Outperform |
** |
(11 points) |
|
Amazon.com |
Outperform |
** |
(9 points) |
|
Google |
Outperform |
*** |
27 points |
And while Piper has more wide ranging "Ether" experience, and a better record in the field ...
|
Stock |
Piper Says |
CAPS Says |
Piper's Picks Beating (Lagging) S&P by |
|---|---|---|---|
|
Baidu |
Outperform |
** |
116 points |
|
Netflix |
Outperform |
** |
105 points |
|
|
Outperform |
*** |
28 points |
... the fact remains that the majority of Piper's recommendations go awry, as the analyst sports only a 49% record for accuracy across all markets.
All of which suggests that when UBS says it sees eBay's marketplaces business "turning a corner," investors are right to be skeptical, and may want to wait for proof of this before buying the stock.
Similarly, when Piper tells us that unique visitors to eBay's websites were up 12% in August, that "79% [of online shoppers are] 'satisfied' or 'very satisfied' with eBay," but that marketplace revenue will be down 8% year over year in September ... well, Fools are right to ask 1) why an increase in unique visitors is not translating into increased revenue, and 2) why there's a clear contradiction between UBS's argument that eBay's marketplaces are turning a corner and Piper's sour September revenue projection.
And while I'm on the subject ...
So, suffice it to say that I'm in agreement with the investors who aren't overly enthused about these latest upgrades on eBay. Or maybe that doesn't suffice. Before we close this column, let me point out a couple of other reasons to be cautious on the stock.
First off, eBay may have only garnered 1% in gains yesterday, but this may have something to do with its rise over the last few days. After all, UBS and Piper are late to this party. Last week, eBay attracted two separate analyst upgrades from All-Star-ranked firms Janney Montgomery Scott and Bernstein. And that's coming on top of my own endorsement of the stock back in late July.
Second, and more importantly, all of these upgrades and endorsements have already had their effect. eBay's up some 14% since I argued its bargain-hood two months ago. It's gained a total of 10% over just the past five trading days (versus a 2% gain for the S&P 500).
So, while I still believe that eBay is a buy at the right price, I'm no longer as certain that eBay's price is right. Selling for a 20 P/E and for a more modest, but still-pricey-relative-to-its-growth-prospects of 14 times free cash flow, I'm beginning to suspect that this stock has had its day.
Foolish takeaway
It's time to declare victory and go home, Fools. But we'll be happy to take another look at eBay at a better price, on another day. As for whether this comes from a drop in price, or unexpected growth in profit -- it's all the same to me.
