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eBay Inc (EBAY): Is It Too Much?

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eBay Earnings ReporteBay Inc (NASDAQ:EBAY) has tumbled over 7.5% over the last week after reporting a mixed bag of earnings. Is this a great opportunity to snatch up this e-commerce company?

Amazon.com, Inc. (NASDAQ:AMZN), like eBay Inc (NASDAQ:EBAY), is seeing increased competition from other online retailers. Many of the traditional retailers are now running e-retail sites. I think Amazon is expensive no matter how you slice it, from a P/E to EV/EBITDA basis.

Compared to Amazon.com, Inc. (NASDAQ:AMZN), eBay indeed appears cheap; however, when stacking it up against other major Internet companies such as Yahoo! Inc. (NASDAQ:YHOO) and Google Inc (NASDAQ:GOOG), it appears that eBay might not be that great of an investment.

From a valuation standpoint, eBay is in line with major Internet peers:

eBay Amazon Yahoo! Google
Forward P/E 16 74 16.1 14.9

Thus, would investors be better off investing in one of the other “high-growth” Internet stocks?

eBay Inc (NASDAQ:EBAY) is still one of the largest online retailers in the world, operating its famous auction marketplace and also running a payments segment (PayPal). Earlier this month, eBay Inc (NASDAQ:EBAY) managed to post EPS of $0.63, compared to $0.55 for the same quarter last year, on the back of a 14% rise in revenue.

However, the retailer guided down 2Q EPS expectations, projecting EPS between $0.61 and $0.63 on revenue between $3.8 billion and $3.9 billion, both below previous consensus forecasts of $0.65 EPS and closer to $4 billion in revenue.

eBay Inc (NASDAQ:EBAY) has been trying to hedge the market-share infringement. Yet, unlike eBay, Amazon struggles with profitability. However, there could be items in the works that weight its earnings more toward the higher-merging virtual goods, such as the recent announcement of its TV set-top box. Amazon.com, Inc. (NASDAQ:AMZN) also continues to squeeze margins by looking to open new distribution centers and expand internationally.

Amazon’s first-quarter profit came in down 37% year-over-year due to these aggressive expansion plans. The e-commerce giant reported a profit of $0.18 per share, compared to $0.28 for the same time last year.

Heading into 2013, there were a total of 58 hedge long the stock, which includes a number of heavy hitters, such as top owner (by market value) Ken Fisher’s Fisher Asset Management, with others being Tiger Global Management, Blue Ridge Capital and billionaire Ken Griffin’s Citadel Investment Group.

eBay Inc (NASDAQ:EBAY) commands some of the highest hedge fund interest among all of the stocks listed, with a total of 81 hedge funds owning the stock going into 2013, which also happens to be a 14% increase from the previous quarter. A few of the funds owning the largest positions included billionaires Stephen Mandel and Steve Cohen.

A better Internet investment

Yahoo! Inc. (NASDAQ:YHOO) is a leading provider of web-based services and advertisements, while its search business continues showing signs of improvement. However, the competition is fierce given the two-tech powerhouses that currently own the number one and two spots in U.S. search market share: Google and Microsoft Corporation (NASDAQ:MSFT).

Yahoo! is also increasing its mobile exposure. Yahoo! has little to no mobile- advertising revenue as of yet, but research firm ComScore believes that Yahoo’s unique user share increased to 14.8% in November 2012 from 14.1% in March 2012.

Yahoo! Inc. (NASDAQ:YHOO)’s shift towards mobile is also a positive in the respect that accelerating mobile-use trends are expected to continue their rapid growth. ComScore believes that mobile users are expected to surpass desktop users in 2014.

Yahoo! has also been refocusing its operations and shedding non-core assets in hopes of returning to its core businesses of search and mail. This includes the monetization of its Asian assets. Yahoo! sold off half its 43% stake in Alibaba for $7.1 billion. Yahoo!’s remaining stake in the leading Chinese-Internet company, Alibaba, could also prove to be even more rewarding if the company continues its stronghold on the market, currently owning more than 80% share of China’s eCommerce market.

Yahoo! commanded more hedge-fund interest than Amazon.com going into 2013, with a total of 60 hedge funds long on the stock. Of course the most notable hedgie is billionaire Dan Loeb’s Third Point, with approximately a $1.5 billion position that made up 26.6% of its total 13F portfolio. However, another notable hedge fund is the number-two owner and tiger cub Chase Coleman’s Tiger Global Management, with 5.2% of its 13F portfolio allocated to the stock.

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