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.”