PowerPoint

Thinh TranTu NguyenJohn KoongNaco Chen

George Chou

eBay’s mission is to build the world’s most efficient and

abundant marketplace in which anyone, anywhere, can buy or sell

practically anything.

History eBay Inc. was formed as a sole

proprietorship in September 1995 and was incorporated in California in May 1996. In April 1998, eBay reincorporated in Delaware and in September 1998 eBay completed the initial public offering of their common stock.

Present

As of December 31, 2003, through wholly owned and majority-owned subsidiaries and affiliates, eBay had Websites directed toward the United States, Australia, Austria, Belgium, Canada, China, France, Germany, Hong Kong, Ireland, Italy, The Netherlands, New Zealand, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan and the United Kingdom.

38th Richest person in the world with net worth of $5 billion according to Forbes

Founder & Chairman

Pierre M. Omidyar founded eBay as a sole proprietorship in September 1995. He has been a director and Chairman of the Board since eBay's incorporation in May 1996 and also served as its Chief Executive Officer, Chief Financial Officer and President from inception to February 1998, November 1997 and August 1996, respectively.

Officers & Compensation

Whitman, Margaret C………………………………President & CEOBannick, Matthew J. ………………………………………Senior Vice President and General Manager,

Global Online Payments and Chief Executive Officer of PayPal

Cobb, William C. …………………………………………….

Senior Vice President and General Manager, eBay International

Webb, Jr., Maynard G………………………………Chief Operating Officer Jordan, Jeffrey D…………………………………….

Senior Vice President, eBay North America

$2,191,976.00

$1,021,605.00

$753,591.00

$1,849,617.00

$1,298,928.00

Profile

eBay Inc. developed an Internet-based community in which buyers and sellers are brought together to buy and sell almost anything. The eBay online service permits sellers to list items for sale, buyers to bid on items of interest and all eBay users to browse through listed items in a fully automated, topically arranged service that is available online seven days a week.

Online Auction

REVENUE BY PRODUCT CATEGORIES

(by percentage)

MOTORS29%

COMPUTERS9%

CONSUMERS/ELECTRONICS

9%CLOTHING/ACCESSORIES

8%

MOVIES/MUSICS8%

SPORTS7%

COLLECTIBLES6%

HOME/GARDEN6%

TOYS5%

CAMERAS4%

INDUSTRIAL 4%

JEWELRY5%

J

$-

$10,000.00

$20,000.00

$30,000.00

$40,000.00

$50,000.00

$60,000.00

DO

LL

AR

S (

mil

lio

ns)

EBAY

AMAZON

COSTC

O STAPLES

BED BATH

& BEYOND

COMPANY

INDUSTRY COMPARISON OF RETAIL SPECIALTY MARKETS

MARKET CAPITAL

INDUSTRY COMPARISON OF RETAIL SPECIALTY MARKETS

EBAY46%

AMAZON17%

COSTCO16%

STAPLES12%

BED BATH AND BEYOND9%

Growth rates % (Strength)

 Company  Industry

 S&P 500

Sales (Qtr vs year ago qtr) 58.70 27.80 11.20

EPS (YTD vs YTD) 92.10 NA 31.20

EPS (Qtr vs year ago qtr) 92.10 NA 31.20

Sales (5-Year Annual Avg.) 82.55 16.51 5.12

EPS (5-Year Annual Avg.) 109.17 NA -3.24

Dividends (5-Year Annual Avg.) NA NA 1.71

Price RatiosPrice Ratios (Strength)

 Company Industr

y  S&P 500

Current P/E Ratio 82.1 NA 21.3

P/E Ratio 5-Year High NA NA 64.8

P/E Ratio 5-Year Low 49.6 NA 16.5

Price/Sales Ratio 19.12 4.73 1.49

Price/Book Value 9.67 5.64 2.91

Price/Cash Flow Ratio 71.60 89.90 12.70

Profit Margins % (Strength)

  Compan

y Industr

y  S&P 500

Gross Margin 87.8 54.3 48.0

Pre-Tax Margin 29.3 1.2 10.9

Net Profit Margin 23.7 -1.9 7.2

5Yr Gross Margin (5-Year Avg.) 86.9 53.2 47.5

5Yr PreTax Margin (5-Year Avg.) 27.6 -66.6 9.2

5Yr Net Profit Margin (5-Year Avg.) 17.7 -66.7 5.6

Financial Condition (Strength)

 Company

 Industry

 S&P 500

Debt/Equity Ratio 0.00 0.22 1.23

Current Ratio 2.8 2.4 1.5

Quick Ratio 2.4 2.2 1.0

Interest Coverage 119.9 2.0 3.3

Leverage Ratio 1.2 1.7 6.0

Book Value/Share 8.15 3.03 11.77

Investment Returns % (Weakness)

 Company

 Industry

 S&P 500

Return On Equity 12.0 NA 14.2

Return On Assets 9.9 -1.3 2.4

Return On Capital 12.0 -1.8 6.3

Return On Equity (5-Year Avg.) 7.2 NA 12.1

Return On Assets (5-Year Avg.) 6.1 -30.2 2.0

Return On Capital (5-Year Avg.) 7.1 -42.3 5.7

Management Efficiency (Strength)

 Company Industr

y S&P

500

Income/Employee 113,000 -6,000 23,000

Revenue/Employee 475,000 310,000 315,000

Receivable Turnover 8.9 10.5 7.1

Inventory Turnover NA 25.3 7.9

Asset Turnover 0.5 0.7 0.4

Last Trade: 82.33

Trade Time: Jul 07

Change:  1.14 (1.43%)

Prev Close: 79.47

Open: 79.29

Bid: 46.61 x 100

Ask: 110.29 x 100

Day's Range: 77.92 - 79.37

52wk Range: 49.87 - 94.13

Volume: 6,410,703

Avg Vol (3m): 8,776,227

Market Cap: 51.49B

P/E (ttm): 82.11

EPS (ttm): 0.954

Div & Yield: N/A

Market Capitalization

Holding Period Return2004

(12/31) 2003 2002 2001 2000

Background Analysis:

HPR = Ending Price – Beginning Price + Distributions

Beginning Price 0.3421 0.90530.013

8 0.0136

Earnings growth

rate estimate

(2004) 0.5906

Dividend 0 0 0 0 0

Price 86.71 64.61 33.91 33.45 33

HPR 0.3421 0.90530.013

8 0.0136  

(expected)

2004 2003 2002 2001 2000

NI 441,771 249,891 90,448 48,294

(+)Deprecitaion 159,003 76,576 86,641 38,050

(-)Capital Expenditures 581,751 161,907 166,323 49,753

(-)∆ in working capital 416,372 378,568 165,644 165,756

(+) ∆ in long-term debt   110,678 1,790 604 -3,614

FCFE -117,363 -286,671 -212,218 -154,274 -132,779

(Thousand) (Thousand) (Thousand) (Thousand) (Thousand)

Free Cash Flow to Equity

2004 2003 2002 2001

Beta eBay 1.5877 1.7072 2.7586 3.3931

Beta= COV(RIBM, RS&P500)/VAR(RS&P500)

Unlevered Beta 1.5112 2.5398

[Equity/(Equity +((1-T)Debt))]* BetaEquity=Beta_unlevered

Risk Analysis

2004(7/15) 2003 2002 2001

FCFE 12/31/2004 -117,363,107 -286,671,000 -212,218,000 -154,274,000

shares outstanding 657,400,000 649,293,000 311,277,000 277,259,000

G 12/31/2004 0.5906 -0.3508 -0.3756 -0.1619

P 7/15/2004 83.46 64.61 33.91 33.45

Ke(required return on equity) 0.5885 0.5878 -0.3780 -0.3985

Discounted Cash Flow Model

2004(7/15) 2003 2002 2001

Rf 0.0125 0.0102 0.0163 0.0386

Rm-Rf 0.0185 0.3206 -0.2261 -0.1511

Beta 1.5877 1.7072 2.7586 3.3931

Ke(required return on equity) 0.0419 0.5575 -0.6074 -0.4741

The company is currently underpriced because Ke( DCF model) > Ke(CAPM); 0.5885>0.0419

CAPM

Market Efficiency

June 23, 2004. Ebay announces the eBay solutions directory, a new online directory of software and services that supports trading activity on the World’s Online Marketplace.

WEAK FORM

June 3, 2004 OPEC announces oil production increase up to 2 million barrels a day in July 2004.

NO FORM

2003 2002 2001

We= Equity/(Equity+Debt+Preferred Stock) 0.8413 0.8803 0.8514

Wd=Debt/(Equity+Debt+Preferred Stock) 0.1587 0.1197 0.1486

Wp=Preferrd stock/(Equity+Debt+Preferred Stock) 0.0000 0.0000 0.0000

Ke 0.2400 0.1500 0.0900

Kd 0.2374 0.1081 0.0347

Kp 0.0000 0.0000 0.0000

WACC=We*Ke + Wd*kd*(1-T)+ Wp*Kp WACC   0.2278 0.1402 0.0792

Cost of Capital and Optimal Capital Structure

M&MeBay Capital Structure

0.1402

0.0792

0.2278

0

0.05

0.1

0.15

0.2

0.25

0.1 0.12 0.14 0.16 0.18

D/TA

WAC

C

WACC

Current Capital Structure

Equity

Debt

Industry Capital Structure

82%

18%

Equity

Debt

100%

Strengths

High growth Positive HPR Very low debt Under priced High profit margins

Weakness Return on Equity Beta slightly high

Expert Analyst

Conclusion

We recommend that investors BUY shares of eBay common stock