eBay leaves investors cold

Once again eBay delivered a great set of results this week. And once again eBay disappointed investors with a light forecast for 2008.

The problem for the share price is that investors look forwards, not backwards. And with a revenue growth of 14% predicted at the top end of the forecast, growth hungry investors gave eBay the thumbs down. Revenue has just grown in 29% in 2007 so a deceleration like that is hard to stomach.

The problem as ever is that the marketplace business, which accounts for almost two thirds of the revenue, is struggling to grow having become a victim

New CEO John Donahue is going to make some radical changes to the eBay experience in an effort to re-ignite growth. But this creates a risk that the changes will have the opposite effect. Only time will tell and investors are an impatient bunch.

Assuming that eBay earns $1.70 per share in 2008, eBay is on a 2008 PE of 16. This is incredibly low for a company of eBay's quality.

I think eBay is great value at this price. It has an amazing company in PayPal, $5 billion in cash, a share buy back in progress, a great cash cow in the eBay marketplace and a couple of wild cards in Skype and the classified sites that are in hyper growth mode.

What am I going to do? Watch from the sidelines as normal. I already have a full position in eBay and I am not going to average down.

In 2004 eBay investors had an exciting time as the share price doubled in one year. I am still waiting for those days to return again. Luckily I am a very patient man!