"I think the investment community is recognizing that this is a business that could drive significant returns over and above the targets they set," says Lauren Cooks Levitan, an analyst with Robertson Stephens.
In fact, many believe that eBay will become a profit-making juggernaut much like Microsoft in the 1990s. "Microsoft rode the wave of personal computing," says Anthony Noto, of Goldman Sachs. "EBay is going to ride the wave of commerce."
Whitman and her team are doing what they can to temper those expectations, in no small part to give themselves some wiggle room. "I respond with real firmness," says CFO Rajiv Dutta. EBay, he says, is still a young company that will require heavy investments to continue driving growth. Balancing that growth potential with shorter-term profits will remain a delicate task. "It would be very wrong for us to make this into a very big cash cow," Dutta cautions. "Could we make it? Absolutely. Would it benefit shareholders? Absolutely not."
But Wall Street's not listening. The company trades at 151 times expected 2001 earnings - compared to 35 times for AOL Time Warner and 41 times for Schwab. And consider the following: EBay's market value of more than $16 billion tops those of the remaining 25 publicly traded e-commerce companies combined. While many of the survivors are hanging on for dear life, the list also includes the likes of Amazon, Expedia, Homestore, Priceline.com and Travelocity.com. "The company is great," says Michael Legg, an analyst with Jeffries & Co. "The stock is expensive."
With no real competition on the horizon, Whitman sees her biggest challenge elsewhere: keeping eBay nimble and maintaining the community spirit even as it expands. There are already signs that some sellers have grown disheartened because of increased pressure from bigger businesses hawking similar wares on eBay. Maintaining what Whitman calls a "small-town feel on a global scale" may indeed be the company's greatest task.
Whitman takes pains to distinguish her company from run-of-the-mill retailers, but she has managed to achieve what online merchants have only dreamed of: EBay has come closest to being the Wal-Mart of the Internet. "EBay has always been the value-price channel," says Munjal Shah, president and CEO of Andale, a company that makes software to automate sales on eBay. "Now it is the value-price channel where you can find anything."
That's what makes it so Wal-Mart-like: EBay has already shown it can thrive when a slowing economy turns shoppers into bargain-hunters. But being like Wal-Mart also carries a drawback: It doesn't feel much like a small town. Then again, if eBay can mint profits a la Wal-Mart, community may not matter that much after all.
