If there's such a thing as a mutual-fund ownership bubble, eBay ( EBAY) is experiencing one. The San Jose, Calif.-based online auctioneer stands alone among Internet companies in living up to the most optimistic expectations, including better-than-expected third-quarter earnings posted in October. The company's performance has been amply rewarded by Wall Street and Main Street investors: eBay shares, while volatile, have soared more than 800% since the company's 1998 IPO and are up 109% since the beginning of 2001. Not surprisingly, mutual-fund managers looking for decent returns have piled up on eBay during the past ugly year. The number of large-cap funds reporting a stake in eBay in the latest quarter more than doubled to 291 from 142 in the year-earlier quarter, according to research conducted by Morningstar for TheStreet.com. While surely some fund skippers were led to the company by in-depth analysis, a lot of the new eBay stakeholders are engaged in good old-fashioned performance chasing. Therein lies the problem, which has consequences for eBay stockholders and fund investors alike: The fund world's rush into eBay has helped bid the company's shares, hovering around $70, up to a triple-digit price-to-earnings multiple, essentially pricing it beyond perfection. "This is a great company, but a very expensive, overvalued stock," says David Kathman, the Morningstar stock analyst who covers eBay. "I put the company's fair value at $47." Given eBay's remarkable operating performance during the past few years, fund managers' love for the stock can be understood. The company has posted average annual earnings growth of 132% over the last three years, and average revenue growth of 106%. The company projects sales to soar to $3 billion by 2005, from $749 million in 2001, and many analysts say eBay is likely to meet that target.