RealTime IT News

eBay Fee Hike Pleases Analysts

eBay's decision to raise listing fees about 7 percent while implementing a 10-cent fee for the 10-day listing option made analysts smile and sent the company's stock climbing in early trading today.

Deutsche Bank Alex Brown raised its investment rating on eBay Inc. to "buy" from "market perform" and Goldman, Sachs said it is maintaining the stock on its U.S "recommended" list.

Users of the service were less sanguine, complaining on eBay's message boards that it's a buyer's market these days, not a seller's and saying that eBay should consider more free listing days instead of raising the fees. The auction site giant has always charged fees but has not increased them in nearly five years. However, Yahoo! recently introduced listing fees to its auction site.

eBay's fee structure is based on the value of the item being auctioned. The company said in a message to users that it plans to continue investing in technology, marketing and customer support. Final value fees, other feature fees, and listing fees for vehicles, eBay Premier, and Real Estate remain unchanged.

A technology investment certainly couldn't hurt; the service has suffered a number of outages over the past several years, including one for almost 11 hours on Jan. 3 because of a series of failures that affected both its primary and back-up systems.

"We estimate that this price increase will increase overall auction fees by approximately 6 to 8 cents per auction, but could also cause a correlated decrease in listings," Goldman, Sachs analysts advised clients.

Still, GS said that it estimates the company will report a solid fourth quarter with revenue in the range of $128 million to $130 million versus its estimate of $124 million and EPS in line to a penny higher than its seven cents a share estimate.

Investors liked the news, too: eBay stock closed Tuesday at $43.81 but shot up $3.31 to $47.12 shortly after the market opened this morning.

Reuters quoted W.R. Hambrecht analyst Derek Brown as writing that the eBay price increase" is a powerful indicator of the health of eBay's franchise and of the company's superior competitive positioning.

Goldman, Sachs went on to say that it thinks the price increase is less likely to result in a decline or noticeable slowdown in listings for two reasons : (1) the lack of viable alternatives to eBay and (2) the effect of the price increase is nearly equivalent to an increase in postage and packaging costs, which have not been seen to have a negative effect.

GS did say, however, that "we continue to be cautious on (eBay's) )valuation and believe that a 2001 P/E of 125x, compared to 50x for leading technology companies and 32x for leading consumer companies is rich by any measure."