EBAY INC. $49 - Nasdaq symbol EBAY

EBAY INC. $49 (Nasdaq symbol EBAY; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 1.3 billion; Market cap: $63.7 billion; Priceto- sales ratio: 3.8; No dividends paid; TSINetwork Rating: Above Average; www.ebay.com) gets 51% of its revenue by charging users fees to sell goods on its shopping websites, including its main auction site, which it launched in September 1995. This site now has 145.1 million users.

eBay gets a further 43% of its revenue from processing online transactions, mostly through its wholly owned PayPal subsidiary. This business now has 148.4 million users. The remaining 6% of eBay’s revenue comes from its Enterprise division, which helps businesses process online orders.

The company lost $2.4 billion, or $1.82 a share, in the three months ended March 31, 2014. That’s mainly because it transferred $9.0 billion in cash from its overseas businesses to its U.S. headquarters, triggering a $3.0-billion tax bill.

However, the cash will help eBay fund its plan to buy back $3.8 billion worth of shares. It could also use the funds to make an acquisition or expand its existing businesses.

Without this charge and other unusual items, eBay earned $899 million, up 8.4% from $829 million a year earlier. Due to fewer shares outstanding, per-share earnings rose 11.1%, to $0.70 from $0.63. Revenue gained 13.7%, to $4.3 billion from $3.7 billion. The stock is down from $60 in February 2014, partly due to concerns over rising competition from other online sellers, such as China’s Alibaba, which recently launched a new shopping website in the U.S. The stock has also been hurt by bad publicity after online intruders accessed eBay users’ personal information.

As a result of the stock’s decline, it trades at just 13.3 times the $3.69 a share that eBay will likely earn in 2014.

eBay is still a buy.

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Blue chip stocks are big, well-established, dividend-paying corporations with strong business prospects. These are companies that also have sound management that should be able to make the right moves to keep competing successfully in a changing marketplace.

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Value Stocks

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One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to its sales, earnings or assets), then hold on to them as mainstream investors recognize the value and push up the share price.

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