New Trade: Long eBay ($EBAY) & Short XOXO Group ($XOXO)

By: ispeculatornew
Date posted: 02.18.2013 (3:00 am) | Write a Comment  (1 Comment)

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Well, I did end up closing a few trades last week and unfortunately did not do so well on the other ones…so I’m much closer to flat performance now! As always, you can see my live tech long & short trades and performance here:

2013 Long & Short Tech Stock Picks

Today’s trade involves two companies that are basically trading at identical forward P/E… one of them is very easy to explain but the other one does seem overvalued. Let’s start off by looking at the numbers for both stocks:

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You’ll notice that eBay is basically trading at 6 times XOXO’s price and has 6 times the earnings per share. The major difference is that while eBay is growing at 20% or so per year..XOXO lags with revenues increasing in the single digits.

EBAY Revenue Quarterly YoY Growth Chart

EBAY Revenue Quarterly YoY Growth data by YCharts

Long eBay (EBAY)

If you track what’s happening on the scene of internet payments, you’ll notice two major tendencies:

-tons of competitors such as Facebook, Amazon, Visa and others are all making a major push to offer competitive products
-because of the “social” effect, eBay’s Paypal remains as dominant as it’s ever been..fact is that it’s the default method of payment so getting consumers and companies to switch is a challenge

Other than that, eBay is in many regards the 2nd ecommerce store on the web behind Amazon making it very possible for high growth to remain there for the next few years…

EBAY

xoxoShort XOXO Group (XOXO)

Things have improved a bit for XOXO since changing its name and ticker from The Knot (KNOT) but I remain very skeptical of how much growth they will be able to bring, especially when I compare it with eBay. Yes, margins do seem like they are improving but that is not a long term solution…

xoxo

Disclaimer: I will enter into this trade on Tuesday morning but have no positions as of this time…

 

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1 Comment

  1. Comment by Doctor Stock — February 18, 2013 @ 10:28 pm

    Ebay is a great financial to add to your portfolio. With the right purchase time and plan for a strategy, some good profits can be had!

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