eBay (EBAY): Back to all-time highs

By Michael Cintolo, Editor of Cabot Market Letter and Cabot Top Ten Trader

From Cabot Wealth Advisory 10/23/12 Sign up for free Cabot Wealth Advisory e-newsletter

I think eBay (EBAY) can continue to do well. Now, the company isn’t the most exciting; it now has $13.5 billion in annual revenue and is well-known to just about everybody. But that’s kind of the point; in this environment, institutional investors want surety and safety, and eBay delivers on both fronts.

More specifically, the stock reacted very well to a solid-but-not-spectacular quarterly report last week. Both sales and earnings rose 15%, and earnings estimates were hiked slightly as analysts remain optimistic about the firm’s PayPal subsidiary, which saw revenues advance 23%. Moreover, the upside potential for PayPal’s offline initiatives is huge, with a big deal with Discover’s merchant network that will kick in next year.

Bottom line, you have a reasonably valued stock (22 times earnings) that has already reported a beat-and-raise quarter, whose growth should gradually accelerate in the quarters to come. That’s why the stock lifted back to all-time highs last week despite the shaky market.

I don’t expect EBAY to make you rich, but I do think shares are a decent buy in the 46 to 49 area, with a stop a few points below your cost; my guess is that big investors will support the stock on weakness, even if the market remains under pressure.

EBAY was named a Cabot Top Ten Trader stock on April 23 at 38.5. Click here for more information on Cabot Top Ten Trader.