eBay’s (EBAY) stock price rose 75% in 2012 and many Wall Street analysts expect the bounce to continue and have classified it a breakout stock. According to a JagsReport article, "eBay had its buy rating reaffirmed by analysts at BGC Financial who have a $65.00 price target on the stock, up previously from $52.00".
Due to the surge in EBAY's stock price, a lot of investors are now asking whether there is more to the stock? Is EBAY a buy, sell, hold or even a short? Has it risen too high, too fast?
eBay's fundamentals look attractive
It was eBay and Amazon (AMZN) that a lot of stock traders took long positions on during the holiday season knowing full well of the obvious spike in sales that these ecommerce giants would experience. They were well rewarded for going with the blatant picks. The problem with Amazon is its extremely high P/E ratio of 3547.98; eBay is then a hundred times more attractive given its P/E of 18.05 and the much lower trading price of $52.56 per share.
eBay's EPS of 2.93 also makes it a better option to trade than Amazon's EPS of 0.07. The growth rate of 21.62% in 3Q12 of eBay's EPS was impressive in comparison to Amazon which fell by 97.58%. Additionally, eBay's profit margins are something to boast of at 17.54% in 3Q12, whereas Amazon has had very low profit margins and recorded a -1.98% profit margin in 3Q12. Amazon does have the larger market cap of 120.24B with eBay lagging behind at 68.48B, but it's in the technical analysis that eBay has the edge. A chartist would realize that eBay is headed for a bull flag breakout.
How to go about trading eBay
This is a fairly tough call with investment firms and brokerages having price targets ranging anywhere from $56 to as high as $65.
One thing is for sure: everyone expects eBay stock to go up. In analyzing the situation, a great approach will be a limit order to buy eBay shares at a price around $56 and a stop-limit order to sell the stock when it gets close to $65.
Analysts do expect high upside potential, but it is important to be conservative.