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Stock Question: How does this make sense?

N

NakaNaka

Diamond Member
EBAY beats second quarter expectations, they are up double from the same quarter from a year ago, and yet the stock falls 5 points this morning in the first hour or so of trading. Now, I understand the rules of the market; that if people are trying to sell high with EBAY right now, that the stock will fall. But 5 points is a lot, and with the market down for the past 2 yrs and EBAY showing no end in sight to remain at the top of its class, I think the news of EBAY being one of the most profitable companies in a troubled economy would spur people to buy.
 
If you think the market is wrong, you should be buying more eBay, particularly now that the profit-takers have given you a nice discount.
 
EBay also posted its third sequential slowdown in U.S. revenue growth.

People are getting out before it bursts.. the p/e is way too high. The stock is massively overpriced, even with the earnings they're coming up with. EBay will top out soon and probably retreat 10's of dollars.
 
Yes, the P/E is too high. But the fact is that it is one of the leading companies/very profitable companies in a market with too many who aren't. I'm going to cash out soon, but not till it gets to 120 or so.
 
The reason ebay traded down upon its earnings announcement was that buyers had priced expectations of an even better quarter and future guidance than what was provided. Hence, even though ebay beat wall st. analysts' expectations, you could argue that the results were somewhat disappointing.

As for it being overpriced, you could have said the same thing when it was trading for 70, shorted it, and gotten rocked all the way up to 115. At the same time, something that trades at that sort of level has more downside than upside, imho. If it starts to go down much further, I wouldn't wait and wait hoping it gets back up to 120. Set a limit ahead of time (5-7%) and get out when you hit it no matter what.
 
The stock goes up and down based on what investors think will happen in the future, not based on what happened in the past.

If they posted record profits but investors think Ebay will do squat next quarter, investors are gonna bail.
 
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