Written by Summary
High and rising levels of free cash flow generation are hard to pass up.
Over $8 billion in foreign tech assets are currently held, which could be used to increase shareholder value and grow the main operating business.
The company’s business model design should help to leverage escalating inflation rates for goods in the macroeconomy.
guvendemir/iStock Unreleased via Getty Images One of the leading internet retail companies, eBay ( EBAY ) has been hit by waves of selling for many months. The ending phase of the COVID-19 pandemic in the U.S. and Europe has thrown a big question mark into the mix about future growth. And, now the spike in oil/gas prices has Wall Street players dumping anything having to do with retail under the bus in early 2022. Worries about a potential recession caused by economic dislocations and supply disruptions from the Russia/Ukraine war are to blame for the latest $5-10 drop in its share quote. To some degree, eBay is the Rodney Dangerfield of Big Tech, not able to catch a break from investor selling or get credit for a variety of things it is doing right. In essence, the absence of confidence in the organization’s future has now opened a terrific opportunity to acquire shares.
I wrote about eBay in several bullish articles at lower price levels in September 2020 and May 2021. My view is quotes around $50 again offer excellent upfront value and a sound play on future growth in the general economy and/or inflation for goods. The company’s basket of tech businesses is something of a bonus investors.
The bullish arguments are actually quite compelling. First, management this past week explained it is now able to develop its own digital payment wallets, thanks to the end of its partnership agreement with PayPal ( PYPL ) that was included in the spin-off deal from 2015. Second, the company is throwing off major free cash flow currently after years of restructuring, asset sales, and monster stock buybacks with the proceeds. Completely underappreciated by Wall Street is the term I would use for its future free cash flow generation. Third, the company is still something of a technology incubator, akin to a mutual fund for shareholders. I believe Wall Street is totally missing the value of its foreign tech holdings in other companies.
Below are 3-month and 1-year charts of total investor returns vs. peers and competitors in the tech retail space, general merchandising with online ordering, and/or running similar back-office computerized infrastructure in Big Tech. My sort group includes PayPal, Amazon ( AMZN ), Meta/Facebook ( FB ), Twitter ( TWTR ), Wayfair ( W ), Shopify ( SHOP ), Etsy ( ETSY ), Walmart ( WMT ), Target ( TGT ), and Overstock.com ( OSTK ). Performance has actually been better than Wall Street pessimism would suggest. YCharts YCharts Digital Wallets and the Vaulting of Items
CEO Jamie Iannone explained some of the new growth initiatives at the company’s investor day on Thursday. Mr. Iannone announced several long-term strategies including plans for a digital wallet, as well as renewed focus on collectables like sports cards.
The digital wallet under development is an effort to replace PayPal with its own offering, to build and streamline an inhouse global payments platform. The idea is users and consumers will be able to store a cash balance outside of the banking system through eBay. This wallet will give buyers and sellers more flexibility when using dedicated accounts on eBay-run websites. The business growth goal is more transactions will take place from regular visitors on its retailing sites. But that’s not all. Greater percentages of each transaction expensed to buyers/sellers will be kept by the company, instead of sending money out to others like PayPal and credit card businesses.
The San Jose, California company also announced eBay Vault , a 31,000-square-foot secure storage facility for trading cards and collectibles. The vault could be a game-changer for eBay, with its ability to merge the physical and digital world for collectors, potentially allowing it to become one of the largest stores of non-governmental assets in the world. The selling point for the company is users can store collectables in a safe-house (foregoing immediate possession), and more easily buy and sell items at higher rates. The company estimates it could hold up to $3 billion in assets within a few years. eBay Website – March 12, 2022 eBay Website – March 12, 2022 Free Cash Flow Story
The biggest long-term positive for […]
source A Collection Of Technology Businesses Too Cheap To Ignore: eBay
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