Over at Clusterstock Henry Blodget thinks that eBay looks cheap. We thought that we would take the opportunity to have a look at eBay using the Valuecruncher interactive tool to analyse the company.

EBAY Valuation

Our assumptions are revenues of US$9.0 billion in 2008 growing to US$11.5 billion in 2010. We have used a flat EBITDA margin of 37.5% from 2008. We have used a terminal growth rate of 4.8%. We calculated this terminal growth rate based on year three growth of 12.2% dropping to a 4% stable growth rate by year 10. We used a terminal capital expenditure number of US$800 million. We have used a WACC (discount rate) of 11.5%.

Valuecruncher Valuation EBAY

Our analysis incorporates the cash on the eBay balance sheet – Valuecruncher calculates a net debt number. Our analysis also incorporates Skype within the current eBay structure. It is possible that eBay will decide to sell the Skype business (Yahoo, Google and Microsoft have been suggested as possible acquirers). There may be a higher value owner of Skype than eBay – but until that situation is clarified we have kept Skype where it is.

Our analysis gives a valuation of US$28.13 which is less than 1% below the current share price of US28.38. We don’t agree with Henry Blodget that EBAY looks cheap. Based on our analysis the current valuation looks about right. Play with our assumptions - what does your analysis say?

Tags: eBay

This entry was posted on Tuesday, June 17th, 2008 at 2:36 am and is filed under International, eBay. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.