This Just In: Upgrades and Downgrades

But in "This Just In," we don't simply tell you what the analysts
said. We'll also show you whether they know what they're talking about.
To help, we've enlisted Motley Fool CAPS,
our tool for rating stocks and analysts alike. With CAPS, we'll be
tracking the long-term performance of Wall Street's best and brightest
-- and its worst and sorriest, too.

Sell it now!

Grand news for eBay (Nasdaq: EBAY) shareholders today: Collins Stewart
hates your stock. In a note issued just this morning, the Wall Street
banker declared the end to eBay's five-week run-up in stock price, and
advised investors to sell the stock.

The reason, in case you're wondering, has little to do with reports also out today that eBay will buy a 34% stake in Gmarket (Nasdaq: GMKT).
Rather, Collins seems to be making a pure valuation call. Pointing to
eBay's 50% rise in stock price over the past month, and saying it sees
"no signs of fundamental improvements" that would justify the spike --
Collins argues that eBay is losing market share to rivals, such as Yahoo! (Nasdaq: YHOO) and Amazon.com (Nasdaq: AMZN), and encountering "gross margin pressure." Collins believes the shares are overpriced, plain and simple.

 I disagree.

Let's go to the tape

Before I tell you
why, allow me to give props to Collins Stewart. This analyst may have a
lousy record for accuracy (Collins gets about 45% of its guesses
right), but on those occasions when Collins wins, it sometimes wins big:

A handful of multibaggers like Shanda and Sohu, incidentally,
explain how Collins Stewart has managed to outperform the S&P 500
by an average of three percentage points per pick. When you don't make
a lot of recommendations (and with only 158 stock picks made public
over the last couple of years, Collins is one of the more taciturn
analysts on the Street), a few big winners can tilt an otherwise
unremarkable record solidly into the green.

I just happen to doubt that selling eBay is going to be a winning play. Here's why:

eBay's cheap

In two words, that
basically sums up my buy thesis on eBay. Generating cash at the rate of
$2.3 billion per year, eBay's enterprise value sits at barely seven
times its trailing free cash flow (FCF) -- yet most analysts expect the firm to grow its profit at nearly 12% per year over the next half decade.

For its part, Collins predicts that 2009 revenue will actually drop
8% to $7.9 billion... but then bounce right back to $8.5 billion in
2010. (Note that Collins explains its short-term pessimism by pointing
to the end of eBay's collaboration with Microsoft (Nasdaq: MSFT)
on the "Live Search" cashback promotion.) But even if Collins is right
in the ultra-short term, it appears to be thinking along the same lines
as the rest of the Street long-term -- that eBay will keep on growing. That's what I'm thinking as well.

Foolish takeaway

Leave aside eBay's stake in craigslist.
Net out the firms' sizeable cash cache, and even this morning's news of
eBay's landgrab in Korea. You simply don't need to go digging around
for all these "hidden treasures" at eBay in order to come to one,
inescapable conclusion:

At seven times FCF and 12% growth, eBay's cheap as all get out. How Collins Stewart can miss this fact is beyond me -- but don't you make the same mistake.

© 2009 UCLICK, L.L.C.