This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

A Case for eBay

NEW YORK (TheStreet) -- Shares of eBay (EBAY) whipsawed in the 48 hours following the company's third-quarter earnings report.

While results for the most recent quarter met expectations, a lower-than-expected estimate for the fourth quarter sent shares lower in after-hours trading last Wednesday.

On the earnings conference call, management seemed fairly optimistic regarding eBay's PayPal division, which continues to show respectable growth. The dismal outlook on the e-commerce market for the holiday shopping period, however, disappointed investors.

But on Friday afternoon, shares of eBay suddenly spiked higher, as the stock muddled near the lower end of its one-year trading range of $50 to $57.

At first, the move could have been confused with fund managers, or "smart money," gobbling up shares near year-to-date lows with a strong finish for equities expected in the last two months of 2013.

But as per usual, a report responsible for the move eventually surfaced, this time from AllThingsD.

In it, eBay CEO John Donahoe admitted that his company's outlook may have been a bit too downbeat. He said, "the truth is Bob [Swan, CFO] and I both have colds. I think it came across more negative than intended."

While blaming a cold may perhaps be a first, it was good for the CEO to clear the air for shareholders. Although in the report he still expressed caution, Donahoe did suggest that the government resolution could help holiday shopping.

Regardless, I think shares could be undervalued.

Up 2.3% this year, the stock is lagging the S&P 500, which is up nearly 22% in 2013.

Using the middle of eBay's fourth-quarter estimated earnings range, we can predict that eBay will earn $2.70 a share on $16.06 billion in revenue in 2013, an increase of 14.4% in earnings and 13.9% in revenue from 2012.

Of course, just because the company has demonstrated double-digit growth year-over-year, doesn't mean the share price has to appreciate.

If the company isn't growing as fast as analysts had hoped, the valuation will compress, adding downward pressure to the stock price.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,113.54 +61.81 0.36%
S&P 500 1,983.53 +9.90 0.50%
NASDAQ 4,456.0160 +31.3120 0.71%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs