Call it the curse of the conservative.

A day after

eBay

(EBAY) - Get Report

said its pro forma earnings came in a mere penny below analyst expectations, the stock was trading down 18% at $84.92. In less than a day, eBay's stock gave up $12 billion in market cap, nearly all of the gains it steadily built up since last September.

Analysts, who had been falling all over themselves to sing the praises of eBay's growth prospects, if not its highflying stock price, were falling all over themselves to downgrade the stock Thursday.

Is missing earnings by a penny really so bad? It is, if you consider how eBay has playedthe guidance game for years. It takes a very conservative approach, aiming for that sweet spot where the number is significantly higher than the previous figure, but still impressively below the number you ultimately post. Few companies have the financial health and the sharp management necessary to pull this off.

Microsoft

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and

Cisco

(CSCO) - Get Report

have succeeded at it; like eBay, both took on the sterling sheen of a blue-chip stock as a result.

But this strategy leaves no room for mistakes. Wall Street begins to expect miracles from you every single quarter -- and nobody gets miracles every single quarter.

There is a twisted moral in here somewhere about the dangers of erring on the conservative. For today, most eBay followers are just looking for a firm grip on where the online auction leader is going. Analyst reports greeted eBay's earnings with a scowl. AmTech Research, Caris & Co., Deutsche Securities and Marquis Investments lowered their ratings on eBay to hold from buy (Marquis had upgraded eBay only two weeks ago), while Friedman Billings and Piper Jaffray downgraded it to market perform from outperform.

Now they tell us.

Stock ratings are often more art than science, but there is a danger in downgrading a stock after it has lost nearly one-fifth of its value overnight, especially when revenue is still growing at 44% a year. After Wall Street finishes changing the label on eBay from "savior of the Internet" to "just another well-run company," the stock may do something that appears unthinkable today -- it may go up again.

eBay is trading at 52 times estimated 2005 earnings and 39 times its 2006 earnings. By contrast,

Yahoo!

(YHOO)

is at 52 times 2006 earnings and

Google

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is at 57 times its 2005 earnings. Much of the selling pressure on eBay today is likely coming from the backlash of the momentum that drove it to a three-digit historical P/E earlier this month.

Overstock.com

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, which is siphoning off some business from eBay, is trading at 158 times its 2005 earnings.

eBay put a good face on its earnings report and its lukewarm guidance for this year. But between the lines was evidence that the inevitable slowdown that eBay had successfully put off was starting to hit home. Gregory Smith, a vice president at Merrill Lynch, gave a good summary of eBay's challenges in a morning note. "The company had to spend more than expected on marketing to hit these results," wrote Smith, who was holding fast to his neutral rating on the stock. "This could mute some of the earnings leverage going forward. eBay's large markets are naturally slowing and new countries require significant incremental expenses. Online and offline advertising is getting more expensive and management acknowledged they have to manage costs better."

In other words, eBay is having to pay more for less, not exactly a winning business proposition. A leak has sprung in eBay's profit margin, and executives are scrambling to patch it.

As CEO Meg Whitman noted in the Wednesday earnings call, the company expects strong growth in China. But several analysts pointed out that, unlike most of the countries it has thrived in, it faces stiff competition there.

Whitman is clearly betting that its PayPal online-payment technology is eBay's foot in the door leading to China. If PayPal becomes the standard, eBay becomes the de facto auctioneer of a fast-growing economy. Given that PayPal may make it easy to process cross-border e-payments, it stands to reason that eBay has a strong edge. But China's Internet is highly regulated, adding several dimensions of complexity to eBay's plans there.

eBay is placing a big bet on this strategy: Much of the $300 million it will invest this year will go into PayPal and China.