Tuesday, September 15, 2009

Why Should We Listen?

Today eBay shares are higher on a report out of Piper Jaffray. Analyst Gene Munster cites improved Web traffic and improved customer satisfaction with the auction website. Here are some sage quotes from Munster's report.
We are upgrading shares of eBay to overweight from underweight based on our quarterly eCommerce survey which suggests recent changes made to the eBay marketplace could have a longer term impact on stabilizing the business.

Web traffic data suggests slight upside to the September quarter.

We believe customer satisfaction is a leading indicator of future sales because it leads to repeat sales, lower marketing spend, and better margins."
Oh yes, these are the real drivers of value for eBay. Not the pile of cash, not the sale of Skype, not the monster cash flow. It's all about customer satisfaction?!? Come on.

eBay is an exchange. It prints money and customer satisfaction is a tangential driver of value at best. But Mr. Munster took his "quarterly eCommerce survey" and he wants everyone to know how important it is!

This brilliant line of thinking is what led to Munster's "underweight" rating at a time when eBay was screaming higher. The only thing Munster should say about eBay is "I'm sorry, I was wrong." But like so many other eBay "analysts", Munster says it is time to BUY. Or should I say "overweight"? Honestly, what does that mean?

Munster really has his finger on the pulse of eBay. This time you should listen to him. I'll bet he's been "overweight" Amazon this entire time. Do these guys even read financial statements anymore? Or is it all about surveys? Must have missed that day of school.

The best part of the report: Munster raised his EBAY price target to $30 from $19. Can you say "contrary indicator"?

Mr. Munster's report is a smokescreen of words to distract investors from his huge mistake. I still own some shares, but given his conversion/endorsement, it's probably time to sell.


  1. Ah yes, the ways of Wrong Street are epitomized in your call-out of Monsieur Munster. With a whopping, dare I say very complicated, 18 companies to analyze, you can see why Munster and his colleagues are perpetually late delivering their "analysis." Man, that golf game must have been hard on the fingers.

    Seriously, 18 companies - here they are:

    These guys' pay should be correlated to their calls, and if they're wrong, they should have to pay their clients.

  2. Any client who listens to this garbage deserves to pay. And any analyst who can earn big bucks selling snake oil should do it. I'm not in the retribution business. It's a free market and buyers should beware.