But tech guru Michael A. Robinson sees this company as the tech sector's top possible turnaround play - a transformation he says that will turn it into a mobile-commerce stock that every investor will want to own.
I'm talking about Internet auctioneer eBay Inc. (Nasdaq: EBAY).
Michael is a recent addition to the Money Map Press team - which means I can now access his insights for Private Briefing. He's an author and former journalist (like me) who's built himself into one of the top tech experts and futurists in the field.
That's not hyperbole. His Radical Technology Profits advisory service celebrated its one-month anniversary last week and he just closed out his first trade with a 132.9% gain.
The fact that he notched an options-magnitude profit on a stock ... in only a month ... is impressive enough - but to do so against such a lousy market backdrop makes this a pretty remarkable trade.
I've been spending a lot of time with Michael of late, just chatting to get to know him a bit more and to get some ideas for all of you. Earlier this week, he made a comment that so intrigued me that it became a conversation unto itself.
Let me share some of that conversation so that you can see how this guy thinks.
We were talking about tech-stock profit opportunities when Michael told me: "You know, Bill, I wouldn't count eBay out as a big-cap turnaround play. The company generates enormous amounts of cash ... something like $1.3 billion in free-cash flow (FCF) ... and it has some $3.8 billion in cash on hand with a 19% return on equity."
At the very least, Michael said that eBay shares represent "a more stable, long-term approach to the market."
But there's also an intriguing potential catalyst at work here.
"While most investors would view this as a somewhat unexciting company, the fact is that eBay has strong growth in Europe because of the downturn there.
"Furthermore, it just launched PayPal as a point-of-sale (POS) alternative," Michael told me. "Just a small fraction of the POS market could be worth several hundred million three years from today. eBay is working with VeriFone Systems Inc. (NYSE: PAY) on this, uniting eBay withthe world's largest maker of credit-card terminals."
So what makes eBay a "turnaround" candidate?"Well, the stock remains well below [about 30%] its 2004 high of $58.21, but this is a much better company than it was back then," Michael explained. "Through a series of acquisitions, it has moved well beyond its original focus as an online flea market. Indeed, key execs now view the firm as a straight-up play on global e-commerce, which they say is a potential $10 trillion industry in less than three years, up from $400 billion just two years ago."
That massive potential is why eBay is moving so heavily into mobile commerce.
Today's consumer is very different from the consumer of a decade ago - if for no other reason than we now have an electronic shopping mall in the palm of our hands ... well, in our cellphone, iPad or tablet.
Last year, eBay boughtGSI Commerce, a leading provider of e-commerce and interactive marketing services for the world's premier brands and retailers. Michael said it's involved in at least $2 billion worth of e-commerce. There's also X.commerce, eBay's open-commerce platform, which allows merchants of all sizes to grow their businesses.
eBay has been shrewd in terms of the friends it's chosen, having established strategic partnerships with craigslist Inc., mobile-commerce player mFoundry, and MercadoLibre Inc. (Nasdaq: MELI), the leading online action firm in Latin America.
eBay also acquired Bill Me Later - a play on easy online payments - to merge with its PayPal business.
Michael told me that, in terms of transaction volume, PayPal currently dominates the firm. Last year alone, PayPal had total transaction volume (not the same as sales) of $119 billion, compared with total merchandise volume of $69 billion for eBay.
Like a chess player focused on victory, eBay continues to make moves today that investors will only understand in the future - once that victory (and a higher stock price) has been secured.
And that focus is global. Just last month, PayPal launched a joint venture with SOFTBANK Corp. (PINK: SFTBF), an Internet leader in Japan.
They expect the joint product PayPal Here in Japan to support the growth of 4.7 million small businesses, which account for 99% of all businesses and 70% of all employment in Japan.
"The key takeaway is that eBay is ramping up as a total e-commerce and mobile-shopping clearinghouse that will touch brands and outlets all over the world," Michael said. "And it runs one of the more active M&A operations in the tech industry."
Now you can see why I like to talk with this guy. If you want to check out more of his research, click here.
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William (Bill) Patalon III is the Executive Editor and Senior Research Analyst for Money Morning, and The Money Map Report. Before he moved into the investment-research business in December 2005, Patalon spent 22 years as a journalist, most of it covering financial news as a reporter, columnist, and editor that included stints with Gannett Co. Inc., and The Baltimore Sun.
Patalon has covered finance and investing, economics, manufacturing, the defense sector, biotechnology, and telecommunications. The companies he’s covered include Eastman Kodak, Xerox, Harley-Davidson, Caterpillar, Westinghouse Electric, Verizon, MedImmune, and Black & Decker.
His most-memorable interviews include: Former President Richard M. Nixon, General Electric CEO John F. “Jack” Welch, Forbes magazine publisher and former Presidential candidate Steve Forbes, and business-turnaround specialist and helicopter-industry pioneer Stanley Hiller Jr.
It was Patalon’s work covering Eastman Kodak Co., during the last half of the 1990s that solidified his reputation as one of the nation’s top analytical business journalists. With his award-winning reports on Kodak’s competitive travails, he consistently scooped his competitors in the national business media. His chronicles of Kodak’s turnaround efforts took him to China, Japan, Silicon Valley, New York, Washington, D.C., and even Hollywood.
Patalon’s work has appeared in Kiplinger’s personal finance magazine, USA Today, and The South China Morning Post, among other publications. A winner of approximately two-dozen journalism awards – including top honors from The Associated Press and the prestigious Society of American Business Editors and Writers (SABEW). Patalon is also the co-author of the Prentice Hall book, Contrarian Investing: How to Buy and Sell When Others Won’t and Make Money Doing it. Before taking over as managing editor of Money Morning, he served as the editor of The Rebound Report, an investment newsletter focusing on turnaround stocks.
Patalon has a BA in Print Journalism from Penn State University, and an MBA in finance from the Rochester Institute of Technology. He lives near Baltimore.
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