eBay: Plenty Of Options To Unlock Value

On Wednesday, eBay (EBAY) will hold a meeting with analysts to discuss the current business and strategy. There is little expectation that the company will announce any dramatic moves, and concern about the health of the business remains high, as expressed by EBAY’s surprisingly low P/E - the stock trades at just 7x expected 2009 results. Of the 29 analysts tracked by Thomson who follow the company, only 4 rate the stock a Buy or Strong Buy.

But Marianne Wolk, an analyst at Susquehanna Financial Group, one of the few outright bulls on the stock, asserts that eBay actually has a variety of options which could unlock substantial shareholder value. In a research note this morning, Wolk runs through a variety of ways that eBay could potentially re-energize the Street about the stock:

• Boots the value of PayPal through a strategic partnership with Google (GOOG). She notes that PayPal and eBay have massive amounts of data on consumer online shopping behavior that could be tremendously valuable in terms of ad targeting. “With PayPal’s conversion and spending data, Google could significantly improve ad targeting, raise click-through rates” and increase cost per click (CPC rates, she says.


• Sell the company to Google or Microsoft (MSFT). She notes that eBay could be tempting, trading at 4x EBITDA.


• Be more aggressive in offering e-commerce infrastructure services to third parties. She says they could offer store hosting, order management and other services. One way to boost that strategy would be to buy GSI Commerce (GSIC), she says.


• Offer third-party fulfillment services, in competition with Amazon.com (AMZN).


• Increase exposure to higher growth geographies; buy MercadoLibre (MELI) and/or Gmarket (GMKT).


• Acquire additional classified ad properties.


• Sell Skype to a strategic buyer such as Cisco (CSCO) or Google (GOOG).


• Institute a dividend. She thinks the company could easily offer a 2%-4% payout.

I’d note that the company was one of the 10 names in a piece over the weekend in Barron’s on stocks to buy now for the long haul. Other tech names on the list include Google and Microsoft.

Today, EBAY is up 8 cents, or 0.8%, to $10.51.