I entered eBay back in November around $22 a share using dollar cost averaging to build a sizable stake. Now I'm currently sitting on a 27% gain wondering just how far eBay shares will run before the year's end.
Back in early November, I wrote an eBay Stock Series that analyzes the company's 3 core assets: eBay, Paypal, and Skype. I'm still confident that eBay has yet to fully monetize these holdings, so expect shares to continue to increase in value.
The holiday season will also be a strong indicator of eBay's internet shopping market share, and if eBay.com can outperform competitors like Amazon.com and Buy.com, then the market should respond accordingly and send the shares upwards.
Moving to eBay's communications company, Skype released a paid unlimited phone calling plan, which allows customers to make as many calls to US & Canada during a 12-month fixed period. This should win new subscribers who prefer the low fees of making calls via the internet.
eBay is certainly risking potential profits by offering unlimited calling plans, but we will see what happens. There has been some negative talk floating around the market, especially from short term traders who bash the stock.
I found this post under eBay's Yahoo! Message Board section, which clearly expresses short-term negative sentiments about eBay stock.
Regardless whether eBay jumps a buck or two (doubtful) or it falls a few bucks (more likely) eBay's fate is sealed because it allowed actual investors to see its true weakness in this, its supposed peak selling season. eBay flopped pretty badly.
It was obvious. It was public. And you know investors saw it clear as day! Now it will take awhile for the institutions to put it together and react, it may take awhile for the retail small time investors to react, after all this is their long term favorite bubble stock, but real investors saw that after all the promises, all the risky purchases, all the needless site changes, and after all the hype:
eBay completely stalled out between $33 and $31 at its peak Christmas selling season. If it can't grow significantly at this quarter, it NEVER will. eBay is sending a clear signal that it is a spent and exhausted force. A done stock.
We ALL witnessed it. We all saw it.
Actual investors especially did.
And that's just the way it is!! !!
This investor is clearly a short term trader because he lets one holiday season determine the long term course of a stock. That's a huge no-no. Holiday sales trends are indicators. It's just another statistic that gives the day traders something to squawk about. We investors solely care about free cash flow, earnings growth, and return on our investment.
As a eBay shareholder, my biggest concern is the company's long term performance because short term trends are what day traders use to examine stocks. We long term investors like to see constant forward growth, supported by strong valuation and large cash holdings.
As long as eBay continues to deliver these key elements, I will continue to hold their stock because we care about results, not short-term indicators.
Tarik Pierce is the founder of InvestorTrip.com and regularly contributes articles to this website.
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While his background is mostly related to trading stocks, he recently gained interest in real estate crowdfunding with Fundrise.