Q. What is happening with eBay Inc.? It was once such a strong stock but hasn’t done well lately.
M.B., via the Internet
A. Charles Dickens wrote “Great Expectations,” and Wall Street sometimes shares the same philosophy. When this online auction powerhouse acknowledged it wouldn’t meet analyst expectations, investors made it pay the price. Its projection of sales between $4.25 billion and $4.35 billion this year didn’t meet the consensus analyst estimate of $4.37 billion.
Also, after meeting or beating Wall Street profit expectations in all but one quarter since 2001, it missed by a penny in the fourth quarter of 2004.
Such signs of slowing down sent shock waves. Shares of eBay (EBAY) are down 40 percent this year, following gains of 80 percent last year and 91 percent in 2003.
At least its chief executive remains on board. Though she interviewed for the top job at Walt Disney Co., eBay CEO Meg Whitman quickly withdrew her name. Whitman received a salary of $995,052 last year, plus a $1.55 million bonus.
The firm’s traditional collectibles sales base is being expanded to include big-ticket items, and its fixed-price sales are growing. It made a smart move in acquiring the PayPal online payment system in 2002.
With users of its online service in about 150 countries, eBay plans to increase investment spending to $300 million this year from $200 million. The extra amount will be used to expand efforts in China, where it has 10 million registered users.
Following its purchase of a 25 percent stake in craigslist.org, a network of online community sites, the company launched Kijiji.com, a place for international users to buy and sell goods difficult to ship.
Recommendations on eBay stock vary due to its uncertainties, but the consensus is currently midway between “buy” and a “hold,” according to the First Call research firm. That consists of four “strong buys,” nine “buys,” nine “holds” and two “strong sells.”
Earnings are expected to increase 26 percent this year, compared with the 15 percent predicted for the specialty retailing industry, according to First Call. Next year’s projected increase is 31 percent versus the 15 percent expected industrywide. The forecast of a five-year annualized growth rate of 29 percent beats the projected 14 percent rise for its peers.
A recent ruling by the federal appeals court in San Jose, Calif., that eBay infringed on a patent owned by MercExchange Inc. of Virginia could force eBay to pay $25 million in damages.
Q. What is your opinion of Oppenheimer Growth Fund? I own it outside my retirement account, but I’m not sure if I should keep it.
D.R. via the Internet
A. It has been bouncing down a rocky road.
The $1.3 billion Oppenheimer Growth Fund (OPPSX) is down 5.68 percent over the past 12 months and had a three-year annualized decline in total return of 4.09 percent. Both results place it within the lowest 15 percent of large growth funds.
Portfolio manager David Poiesz, in charge since mid-2004, obviously hasn’t put up dazzling numbers. However, he did have a solid record compiled over two decades at other funds. He has made this fund’s portfolio less concentrated and more value-oriented than in the past to reduce its volatility.
“I’m not strongly recommending this fund, but I think it is OK and might be worth owning as a reasonable large growth choice,” said David Kathman, analyst with Morningstar Inc. in Chicago.
Investors shouldn’t be alarmed about recent results because Poiesz hasn’t had much time to prove himself yet, Kathman added.
This “load” (sales charge) fund requires a $1,000 minimum initial investment and has an annual expense ratio of 1.18 percent.
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Andrew Leckey is a Tribune Media Services columnist. E-mail him at yourmoney@tribune.com.
