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Unlike Most of Tech, eBay's Still Got the Believers

Tim Arango

While investors at the Merrill Lynch Internet Conference in New York digested the news of Yahoo!'s (YHOO Quote) earnings shortfall and the exit of its chief executive Wednesday, online auctioneer eBay (EBAY Quote) offered a tonic for weary tech investors by reiterating its growth plans and saying it had yet to see the economic slowdown affect its business.

eBay's presentation, which was delayed by 15 minutes or so while people huddled around a television to watch the Yahoo! announcement, revealed a company largely unaffected by both the tech carnage on Wall Street and the slowing economy.

The company repeated its plans to be in 25 international markets by 2005, and said it will increase the integration of its fixed-price site, Half.com, which it purchased last year. eBay said it was also comfortable with is past financial guidance. According to First Call/Thomson Financial, the consensus among analysts is for the company to earn 37 cents a share in 2001.

In response, Merrill Lynch analyst Henry Blodget put out a positive note on the company Thursday, saying "momentum remains very strong in the business." eBay shares recently traded at $39.88, down $2.62, perhaps reflecting Blodget's concern that at 121 times forward earnings, eBay shares are relatively expensive. (Blodget has a long-term buy on eBay, and his firm has had a banking relationship with the company.)

Thriving

"eBay's business seems to be thriving right now," says Derek Brown, an analyst at W.R. Hambrecht. (Brown has a strong buy on the stock, and his firm has no banking relationship with eBay.)

Brown says eBay has been largely unaffected by both the general sluggishness in the economy and the slowdown in the advertising market.

"Their business is expanding, not contracting," he says. "And neither Yahoo! nor Amazon.com (AMZN Quote) could mount much meaningful competition for eBay." Both companies made a go at online auctions, but except for Yahoo!'s dominance in Japan, eBay owns the industry."

And because the bulk of eBay's revenues comes from listing and transaction fees -- and not online advertising -- the company is well-prepared to weather the slowdown, say analysts. Rajiv Dutta, the company's CFO, says one of the main reasons people use the site is to seek out a bargain, something consumers may do more of as the economy continues to slow.

"It's certainly not for convenience," he said at the conference.

Core Beliefs

While the entire afternoon at the conference investors listened to presentations from apprehensive executives urging investors to stick with them, eBay capped the day with a sunny spiel on how well it was doing. And guess what? Investors seemed to believe them, as they gave Dutta a round of applause.

This was in sharp contrast to the icy reception given Amazon CFO Warren Jenson, who in his presentation tried to reassure investors of the company's solid relations with its suppliers. "I bet he really convinced everyone," grumbled one attendee sarcastically after Jenson's talk.

And while Dutta answered numerous audience questions following his presentation -- forsaking the traditional breakout session -- Jenson took questions in a smaller room from which the press was barred.