Valuing eBay's (EBAY) Parts

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Be sure to check out our detailed stock analysis (click here). With eBay (NASDAQ:EBAY) up 50% over the last 12 months, is the stock getting a bit "toppy?" Not by valuation standards. Based on a sum of the parts valuation it appears that eBay still has room to go higher. Be sure to check out our detailed stock analysis (click here).

The real investment thesis for eBay is the fact that its current multiples are being unfairly held down due to its primary classification as an e-tailer or e-commerce company, which is low-margin, macro-economic sensitive. However, I don't believe investors are appreciating the fact that nearly 40% of eBay's revenues are derived from its payments segment (namely PayPal) which has the opportunity for margin expansion and higher growth. Part of the real beauty of eBay is that theMarketplace (eBay.com), what you know as the auction site, is a cash flow generator, which in turn funds the growth and expansion of PayPal.

Sum Of eBay's Parts

For the SOTP valuation, let's break down its two key segments to better calculate eBay's appropriate multiples. So let's find some peers. eBay has two key segments - Marketplace and Payments.

For the Marketplace segment, three of the best competitors areAmazon (AMZN)Overstock (OSTKand Groupon (GRPN). For thePayments segment top peers are Visa (V) and MasterCard (MA).

Both Visa and MasterCard have plans to enter the mobile payments market, with Visa teaming up with BlackBerry and MasterCard with ING. eBay and PayPal's big move into mobile payments includes partnering with Discover to give retail outlets the ability to accept PayPal in store via Discover terminals.

For eBay's Marketplace peers, Groupon is a relative newcomer that is shaking up the e-commerce market (see if Groupon can turn around without Mason). Amazon continues to be the undisputed leader in the e-commerce market, and Overstock is a smaller e-commerce peer, but a peer nonetheless (check out other e-commerce newcomers).

The multiples for the major competitors are outlined below...

read the rest here...