New Trade: Long eBay ($EBAY) & Short Yahoo ($YHOO)

By: ispeculatornew
Date posted: 01.13.2014 (3:00 am) | Write a Comment  (0 Comments)

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Last week I was able to open my first long & short trade of the 2014 season where I traded two extremes from my recently published power rankings. Today is not as extreme from that perspective but I do feel like it makes for a great trade in terms of risk vs reward.

As will be the case all year, my long & short stock picks will be available to see in my live spreadsheet:

Today I’m trading two tech stocks that are both part of the “original internet stocks era”.

You can see the numbers for both companies here:

TickerNamePriceEPSPE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
EBAYeBay Inc52.162.6925.316.6-5.0920.774.511.0610.8913.438.94
YHOOYahoo! Inc41.231.4535.4624.881.190.053.890.724.18-8.13259.97

When I see a company that is able to generate significantly more growth but continues to trade at a cheaper P/E, it screams opportunity…! In my most recent Power Rankings, these two companies ranked #10 and #25…you can imagine which one ranked where:)

YHOO Revenue (Quarterly YoY Growth) Chart

YHOO Revenue (Quarterly YoY Growth) data by YCharts

$ebayLong eBay (EBAY)

You can call me an eBay skeptic. I’m far from convinced that their overall direction with their main business and the movement towards same-day shipping makes a lot of sense. I don’t quite see how eBay can successfully compete with Amazon so trying to do it seems like a bad strategy. That being said, as I’ve been saying for some time now, I continue to think that the biggest value in eBay remains Paypal which still to this day remains mostly uncontested.


Next earnings release: January 22nd 2014

Short Yahoo (YHOO)

Ahhh, I certainly had my fair share of comments regarding my most recent article about Yahoo (YHOO) on SeekingAlpha. I’ll try to answer those as soon as possible but my basic opinion about Yahoo is that while I do believe in Marissa Mayer and in the company’s long term success, I think it will be a very long term project so the recent explosion in the stock price makes me believe that Yahoo will mostly be moving sideways this year. There will be more positive news, more good hires, more positive press. But the actual financials? I expect limited progress this year so the current P/E makes it overvalued.


Next earnings release: January 28th 2014

Disclaimer: No positions on eBay (EBAY) or Yahoo (YHOO) but I will initiate the trade on the open today

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