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Despite Weak Results and Outlook, eBay Shares Look Compelling

NEW YORK (TheStreet) -- Shares of eBay (EBAY - Get Report) are feeling the effects this morning of the first-quarter loss the company reported yesterday, whether warranted or not.

The stock was recently trading at $51.19, down 6%. During the past year, the stock has fallen 2.4%, compared with a gain of 23% for the Nasdaq Composite index.

Late Tuesday, eBay posted a $2.33 billion loss, but that was primarily the result of a $3 billion tax charge due to the repatriation of $9 billion in overseas cash. Excluding that, the company earned 70 cents per share, 3 pennies above the average estimate of analysts.

Revenue rose 14% to $4.26 billion, which was slightly above the $4.23 billion Wall Street estimates.


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The company slightly increased the upper end of second-quarter revenue estimate, while it decreased its earnings-per-share projection to between 67 and 69 cents. It had expected 70 cents.

While the outlook and confusion over the reported loss sent the stock lower, perhaps there's also some guilt by association as tech darling Twitter (TWTR) is taking a massive haircut today, and others associated have also been punished in recent weeks.

The bottom line for eBay, however, is that the shares look compelling here in my view. There are few opportunities these days to own a company that trade for as low as 15 times forward earnings and that consistently boast net profit margins in the high teens or better.

Furthermore, the balance sheet continues to impress. The company ended the quarter with $7.8 billion in cash and marketable securities, and an additional $5.2 billion in long-term investments. In total, that equates to about $10 per share in cash and investments. Meanwhile, debt remains low at $4.1 billion.

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