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eBay Stock Rises on Rainbows and Unicorns

Updated from 12:24 p.m. EDT

SAN FRANCISCO -- Hope springs eternal at eBay (EBAY - Get Report), despite the company's core business providing little justification for it.

The online auction site's stock was 4.4% higher to $12.14 Thursday, a day after the company laid out to analysts its plan to re-focus itself on growing businesses that are actually growing and scaling back the ambition of its main marketplace site.

Helping eBay shares along was management's projection that it would reach overall revenue of $10 billion to $12 billion in 2011, up from $8.5 billion in 2008.

Let's start there: If battered investors have learned anything from the past six months it's that a projection for what a business will do three years from now -- even with the generous $2 billion leeway -- is about as valuable as the 2004 Eric Gagne Los Angeles Dodger bobblehead that eBay will currently help you buy.

Don't you suppose Citigroup's (C - Get Report) forecast was fairly cheery in 2006?

Consider the current Street estimates for eBay. In 2009, analysts are calling for a pullback in revenue to $8 billion. For the sake of argument, let's say that seems reasonable enough given the state of consumer fear (note to Thursdays' retail-sales watchers: Consider the impact of the 8% month-to-month gain in gas prices).

So, too, then do estimates for 2010 revenue to essentially climb back to 2008 levels at $8.43 billion.

But then, in 2011 we're supposed to look for as much as a 40% jump in revenue? Either eBay will be proven wrong or Wall Street will, and not a lot of money has been made betting on eBay over the past four years.

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