eBay a Haven in Hard Times

Fears of an economic slowdown may be taking their toll on the stock market, but a little recession may be just what it takes to jump-start eBay(EBAY).

That's because consumers flock to the auction giant for cheaper goods when times get tough, while sellers become more adamant about moving items that might otherwise lie around.

And the boost in both buyer and seller activity ends up helping eBay's auction business.

"So, if you want a DVD player in this economic environment, you might be happy to have last year's DVD player at 50% off retail," eBay CEO Meg Whitman told Business Week back in March 2001, as the U.S. economy was entering its last recessionary period. "And we see people finding things in their garage that can raise thousands of dollars in cash. So we're seeing a pickup in sellers."

Indeed, eBay got a big boost from the last recession, which lasted from March to November 2001, according to the National Bureau of Economic Research. Shares of eBay rallied 80% during that period, even as major indices, including the Nasdaq, the S&P 500 and the Dow Jones Industrial Average, dropped.

Now, as signs emerge that the U.S. economy could be headed for another slowdown, eBay again may become increasingly attractive to investors.

This is especially true in light of the recent housekeeping done by the company. After several sluggish quarters, eBay reported that it had regained momentum in its core auction business, which grew revenue 24% during the fourth quarter, up from 22% growth during the third quarter.