HOLT VALUATION VID
Today I am analyzing EBAY and I want to tell you why it will outperform market expectations. eBAY focuses on three business functions: 1. Online Marketplaces, including EBAY.com. 2. Payment systems, including Paypal. 3. GSI Commerce, which assists offline stores in selling their merchandise online. eBAY's is currently valued at $51.29, just short of its record high of about $58. Using the holt valuation, we get a warranted price of $65. Despite the fact that the stock price is near record highs, I believe eBAY is still undervalued by both the market and HOLT. The basis for this opinion is that I believe ebay's CFROI levels will increase over the next 5 years while HOLT predicts them to decline. Lets use the 3 driver model on HOLT Lens to illustrate this point. This will look at sales growth, ebitda margins and asset turns over a five year period. The first segment we will focus on is Sales. EBAY has shifted its business model to more easily allow consumers to buy products on its websites.Given that eBAY has consistently had CFROI levels well above its discount rate, eBAY can probably grow its business through acquisitions and through other investments. Marketplace sales growth will at a minimum mirror online retail market growth projections. Ebay's Payment business also looks poised for significant revenue growth. PayPal has averaged around 25% YoY growth over the past three years. recent deals with retailers and credit card companies have allowed PayPal to access millions of additional Consumers. PayPals' mobile payment volume increased by a staggering 250% in 2012. eBAY's payment platform will see 25% revenue growth the next three years but will slow down to 20% over the following 2 years as the market matures. I suspect that GSI, like the marketplaces division, should be the beneficiary online retail market growth. I expect GSI growth to mirror market growth. Once we weight the sales growth projections with the dollar value of each segment, we can calculate the total growth sales projections for eBAY over the next 5 years. The next step in the model is to forecast EBITDA margins and asset turns. In recent years eBAY has invested heavily in expanding its business, That said, EBAY's revenue growth has outpaced its expenses and it's balance sheet. I expect EBITDA margins and asset turns to revert to their 10 year median, closer to where eBAY was in the early 2000s following its first episode of significant growth. This model shows that ebay is a growth company. Recently, executives at eBAY stated that they foresee a 68% increase in revenue over the next three years. These aggressive growth forecasts contradict the HOLT valuation which suggests that eBAY is nearing the end of its product life cycle. I give eBAY a warranted price of $82.56 I believe ebay warrants this price because it will continue to see high sales growth in all business segments but particularly in its payment platform. eBAY will see CFROI levels rise as sales growth will be coupled with better asset turns and increased EBITDA Margins due to efficiencies from its already expanded infrastructure. Foreseeable problems for ebay may include, currency exchange issues as over half its revenue comes internationally and increased competition for its payment platform and marketplace business. Thank you very much for your time.
Today I am analyzing EBAY and I want to tell you why it will outperform market expectations. eBAY focuses on three business functions: 1. Online Marketplaces, including EBAY.com. 2. Payment systems, including Paypal. 3. GSI Commerce, which assists offline stores in selling their merchandise online. eBAY's is currently valued at $51.29, just short of its record high of about $58. Using the holt valuation, we get a warranted price of $65. Despite the fact that the stock price is near record highs, I believe eBAY is still undervalued by both the market and HOLT. The basis for this opinion is that I believe ebay's CFROI levels will increase over the next 5 years while HOLT predicts them to decline. Lets use the 3 driver model on HOLT Lens to illustrate this point. This will look at sales growth, ebitda margins and asset turns over a five year period. The first segment we will focus on is Sales. EBAY has shifted its business model to more easily allow consumers to buy products on its websites.Given that eBAY has consistently had CFROI levels well above its discount rate, eBAY can probably grow its business through acquisitions and through other investments. Marketplace sales growth will at a minimum mirror online retail market growth projections. Ebay's Payment business also looks poised for significant revenue growth. PayPal has averaged around 25% YoY growth over the past three years. recent deals with retailers and credit card companies have allowed PayPal to access millions of additional Consumers. PayPals' mobile payment volume increased by a staggering 250% in 2012. eBAY's payment platform will see 25% revenue growth the next three years but will slow down to 20% over the following 2 years as the market matures. I suspect that GSI, like the marketplaces division, should be the beneficiary online retail market growth. I expect GSI growth to mirror market growth. Once we weight the sales growth projections with the dollar value of each segment, we can calculate the total growth sales projections for eBAY over the next 5 years. The next step in the model is to forecast EBITDA margins and asset turns. In recent years eBAY has invested heavily in expanding its business, That said, EBAY's revenue growth has outpaced its expenses and it's balance sheet. I expect EBITDA margins and asset turns to revert to their 10 year median, closer to where eBAY was in the early 2000s following its first episode of significant growth. This model shows that ebay is a growth company. Recently, executives at eBAY stated that they foresee a 68% increase in revenue over the next three years. These aggressive growth forecasts contradict the HOLT valuation which suggests that eBAY is nearing the end of its product life cycle. I give eBAY a warranted price of $82.56 I believe ebay warrants this price because it will continue to see high sales growth in all business segments but particularly in its payment platform. eBAY will see CFROI levels rise as sales growth will be coupled with better asset turns and increased EBITDA Margins due to efficiencies from its already expanded infrastructure. Foreseeable problems for ebay may include, currency exchange issues as over half its revenue comes internationally and increased competition for its payment platform and marketplace business. Thank you very much for your time.