Signs of a slowdown at eBay have sent its stock plummeting

Taking Stock

Your Money

April 17, 2005|By Andrew Leckey

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. Wall Street sometimes has great expectations.

When this online auction powerhouse acknowledged that 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.

In addition, 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 are down 40 percent this year after 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 company'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 larger amount will be used to expand efforts in China, where it has 10 million registered users.

After 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 that are difficult to ship.

Recommendations on eBay stock vary because of its uncertainties, but the consensus is midway between "buy" and "hold," according to the First Call research firm. That consists of four "strong buys," nine "buys," nine "holds" and two "strong sells."

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 billion Oppenheimer Growth Fund (OPPSX) is down 4 percent over the past 12 months and had a three-year annualized decline of 3.3 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.

"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, ananalyst with Morningstar Inc. in Chicago. "It owns a lot of technology stocks that haven't done all that great, which is a reason why the fund has not done well compared to its peers in its category, but Poiesz still believes in them."

Investors shouldn't be alarmed about recent results because Poiesz has had little time to prove himself, Kathman said.

Andrew Leckey is a Tribune Media Services columnist. E-mail him at yourmoney@tribune.com.

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