Two Years From Now, You'll Wish You Bought eBay (Nasdaq: EBAY)

William Patalon III

You probably know this longstanding Internet company as an e-commerce pioneer – but most likely view it as one whose high-growth years are in the past.

But tech guru Michael A. Robinson sees this company as the tech sector's top possible turnaround play – a transformation he says that will turn it into a mobile-commerce stock that every investor will want to own.

I'm talking about Internet auctioneer eBay Inc. (Nasdaq: EBAY).

Michael is a recent addition to the Money Map Press team – which means I can now access his insights for Private Briefing. He's an author and former journalist (like me) who's built himself into one of the top tech experts and futurists in the field.

That's not hyperbole. His Radical Technology Profits advisory service celebrated its one-month anniversary last week and he just closed out his first trade with a 132.9% gain.

The fact that he notched an options-magnitude profit on a stock … in only a month … is impressive enough – but to do so against such a lousy market backdrop makes this a pretty remarkable trade.

I've been spending a lot of time with Michael of late, just chatting to get to know him a bit more and to get some ideas for all of you. Earlier this week, he made a comment that so intrigued me that it became a conversation unto itself.

Let me share some of that conversation so that you can see how this guy thinks.

We were talking about tech-stock profit opportunities when Michael told me: "You know, Bill, I wouldn't count eBay out as a big-cap turnaround play. The company generates enormous amounts of cash … something like $1.3 billion in free-cash flow (FCF) … and it has some $3.8 billion in cash on hand with a 19% return on equity."

At the very least, Michael said that eBay shares represent "a more stable, long-term approach to the market."

But there's also an intriguing potential catalyst at work here.

"While most investors would view this as a somewhat unexciting company, the fact is that eBay has strong growth in Europe because of the downturn there.

"Furthermore, it just launched PayPal as a point-of-sale (POS) alternative," Michael told me. "Just a small fraction of the POS market could be worth several hundred million three years from today. eBay is working with VeriFone Systems Inc. (NYSE: PAY) on this, uniting eBay withthe world's largest maker of credit-card terminals."

So what makes eBay a "turnaround" candidate?

"Well, the stock remains well below [about 30%] its 2004 high of $58.21, but this is a much better company than it was back then," Michael explained. "Through a series of acquisitions, it has moved well beyond its original focus as an online flea market. Indeed, key execs now view the firm as a straight-up play on global e-commerce, which they say is a potential $10 trillion industry in less than three years, up from $400 billion just two years ago."

That massive potential is why eBay is moving so heavily into mobile commerce.

Today's consumer is very different from the consumer of a decade ago – if for no other reason than we now have an electronic shopping mall in the palm of our hands … well, in our cellphone, iPad or tablet.

Last year, eBay boughtGSI Commerce, a leading provider of e-commerce and interactive marketing services for the world's premier brands and retailers. Michael said it's involved in at least $2 billion worth of e-commerce. There's also X.commerce, eBay's open-commerce platform, which allows merchants of all sizes to grow their businesses.

eBay has been shrewd in terms of the friends it's chosen, having established strategic partnerships with craigslist Inc., mobile-commerce player mFoundry, and MercadoLibre Inc. (Nasdaq: MELI), the leading online action firm in Latin America.

eBay also acquired Bill Me Later – a play on easy online payments – to merge with its PayPal business.

Michael told me that, in terms of transaction volume, PayPal currently dominates the firm. Last year alone, PayPal had total transaction volume (not the same as sales) of $119 billion, compared with total merchandise volume of $69 billion for eBay.

Like a chess player focused on victory, eBay continues to make moves today that investors will only understand in the future – once that victory (and a higher stock price) has been secured.

And that focus is global. Just last month, PayPal launched a joint venture with SOFTBANK Corp. (PINK: SFTBF), an Internet leader in Japan.

They expect the joint product PayPal Here in Japan to support the growth of 4.7 million small businesses, which account for 99% of all businesses and 70% of all employment in Japan.

"The key takeaway is that eBay is ramping up as a total e-commerce and mobile-shopping clearinghouse that will touch brands and outlets all over the world," Michael said. "And it runs one of the more active M&A operations in the tech industry."

Now you can see why I like to talk with this guy. If you want to check out more of his research, click here.

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William Patalon III

About the Author

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Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.

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