Skip to content

(B)(N) EBAY eBay Incorporated

March 26, 2013

Drama. Wall Street is paying forward and worried that eBay’s extraordinarily profitable division, PayPal, will lose operating margin – possibly down as much as (2%) and even (4%) from the current 26% – as PayPal continues its expansion from its path-breaking roots as a secure online payment option to bricks-and-mortar stores such as Mom and Pop’s, and larger retail chains such as Home Depot, Toys ‘R’ Us and JC Penney which it has already landed, a market that they estimate is ten times as big as PayPal’s current pocket (Reuters, March 26, 2013, Wall Street worries about PayPal’s real-world expansion). When Wall Street “worries”, we tend to sniff out opportunities and lower prices for stocks and options because we know what we’re doing and don’t have to guess about the future or other peoples’ businesses. After all, there’s a well-paid management for that and they really like their jobs. Our job is to be an investor and not lose any of our money in the stock market, or on Wall Street, rather than the store front.

EBay is a Nasdaq 100 company with a current market value of  $67 billion, total assets of $37 billion and shareholders equity of $21 billion, and our only complaint is that they’ve never paid a dividend. However, on the plus side, they’ve been in the Perpetual Bond™ continuously since much lower prices of $25 in 2010 (just three years ago) compared to the current stock price of $52 which has been more or less flat since early this year (please see Exhibit 1 below) and lagged the Nasdaq Composite Index which is already up by +7% so far this year. Our estimate of the downside due to stock price volatility is minus ($5), which we could easily absorb on a stop/loss, but, while the jury is still out and who knows how this will break, we could buy some time to think about it by buying the June put at $50 for $2.15 per share today and selling or shorting an offsetting call at $55 for $1.80 per share, so that for a net cost of $0.35 per share ($2.15 less $1.80), we can afford to keep our wallets open for at least a few more months and not worry quite so much.

Exhibit 1: (B)(N) EBAY eBay Incorporated – Risk Price Chart

(B)(N) EBAY eBay Incorporated

EBay Incorporated is a global commerce platform and payments provider that enables commerce through three reportable segments: Marketplaces, Payments and GSI.

(Please Click on the Chart to make it larger if required.)

With reference to Exhibit 1, we only buy or hold a stock if the ambient stock prices appear to be at or above the price of risk or Risk Price (SF) which is currently a meagre $41 (Red Line Stock Price (SP) above the Black Line Risk Price (SF)) and will not change until new balance sheet information becomes generally available.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

No comments yet

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: