Lioness Associates, Inc.

Economic & Corporate Risk/Yield Reports

October 31, 2012  -- eBay Risk/Yield Update for 2012

Refer to Reading Graphs for information on interpretation of the graphs.

The last earnings on October 17th resulted in a small pop for the stock price but, by this date — all has been given back.  This company has done well for most of this year but, may be moving into a "status quo" period.

 There are two main functionalities for this company, the online store and the payment system.  The online store has evolved and is no longer just an auction site, it now acts as a merchandise center where all types of objects can be bought and sold.  Recently, textbooks have been bought overseas for a cheaper price and then sold in the USA for a higher price and this is now in the court system to determine the rights of the original copyright parties when "used" goods are sold - this could impact sites like eBay and Craigslist (along with art auction houses and the like).   And, there are plenty of competitors that sell new merchandise. This is not to say that eBay cannot continue to succeed in this field but, it seems to be having trouble finding a way to spring ahead of the pack. 

The payment system which has evolved to being a major contributor to the bottom line, is a great product but, maybe not getting the attention it deserves.  By being in close quarters with eBay, the payment system may be limiting it's potential with other online merchandise sellers.  And, this is not taking into consideration new competitors that are providing innovative consumer payment options for the next decade. 

Looking at the configurations in more detail, it appears that company direction is muddled and could be helped with a better and separate focus for each of it's main revenue producers.  The stock price escalations experienced this year may not be repeated soon and could frustrate current investors who are likely to see what looks like possible stagnation. Lastly, "mobile" strategy seems to be lacking.  This company just needs some time to consolidate it's position but, first it should determine how to restructure itself to fit into the next decade.


May 31, 2012  -- eBay Risk/Yield 2012

eBay has moved from being a successful auction site to being a leading provider of payment solutions for internet sales.  The last earnings caused an upward spike in price but recently, the problems in Europe have caused uncertainty and a downward movement for the price of this stock.

The EBAY Delta Core/Transient 2012 graph shows an upward movement into "yield" from about April to June and if this is compared to stock price action then, April 16, 2012 had a stock close price of $35.50 and May 31, 2012 had a stock close price of $39.19 which is an increase of about 10.39%.

Even though the core (black line) stays in the "yield" area (albeit with a downward trend), the upward momentum for this stock might be over for the time being.  If the overall stock market was heading higher, this stock could likely move up but, as noted on the USA 2012 economy (see home page), the beginning summer months might be more undecisive sideways action for the markets and this particular stock may not have enough momentum to break out.

One note, the EBAY Risk/Yield 2012 is showing very little "risk" activity compared to the "yield" over the period of May to September 2012.  After September it is notable that the "risk" increases and there is some momentum into the "risk" area.

We'll check back and update after earnings in July. 

      EBAY Delta Core/Transient 2012 graph

       EBAY Risk/Yield 2012 graph

Disclosure as of 5/31/2012 - eBay (EBAY) is not part of our portfolio at this time.