Security Analysis

eBay Inc.

Basim Alnahari, Daniel Perkes, Crystal Yi, Guangchen (Michael) Zhang

BUAD325 Equity Markets and Portfolio Management
Professor Vladimir Atanasov
March 1, 2014

1
 Table of Contents

Executive Summary ………………………………… 3

Introduction ……………………………………….... 4

Industry Overview ………………………………..… 4

Company Overview ………………………..……….. 6

Analysis of Historical Financial Data ………………. 7

Discounted Cash Flow Valuation…………………….. 9

WACC Calculation…………………………… 9

Base Case Valuation………………………….. 9

Base Case Sensitivity Analysis ……………… 10

Relative Valuation………………………………….…11

Conclusion …………………………………………….12

Tables and Figures …………………………………… 13

2
 Executive summary

eBay is an large international corporation that operates in three segments: Marketplace, Payments, and Enterprise.

Marketplace includes eBay.com, Stubhub, and Half.com. Marketplace is eBay’s largest segment by revenue. This segment
is smaller than their main competitors Amazon and Alibaba, but it reports higher net income than Amazon. The majority of
listings on eBay.com are fixed price listings, meaning that eBay.com is becoming more similar to Amazon.

Payments is the fastest-growing segment, and includes PayPal digital payment products, including PayPal Here, a wireless
point of sale system that competes with other systems such as Square. PayPal includes Bill Me Later, which is a line of
credit available within PayPal and on other websites. PayPal also includes Zong, which allows users to make purchases with
a mobile phone and charges the cell phone bill directly. PayPal is a market leader with 40% market share.

Enterprise is eBay’s newest and smallest segment, which provides marketing and website support for other companies.

eBay is currently trading around fair value according to DCF and relative valuation. While there are major growth
opportunities for all three segments of eBay’s business, there are also significant competitors in all three segments. We
recommend a hold at this time.

Company Data

Current Price ($) 52.59

Target Range ($) 41-67
52-Week Range ($) 48.06-59.70
Market Cap ($B) 68.09
Shares Outstanding (B) 1.29
Average Volume (M) 11.35

3
 Introduction

eBay is a multinational multibillion dollar corporation based in San Jose, California that facilitates consumer-to-
consumer trade for goods and services all over the world. The oft-repeated story that eBay was created to sell PEZ
dispensers has, unfortunately, been since confirmed to be a story invented by their PR department to interest the media. It
was originally created as AuctionWeb as Pierre Omidyar’s side hobby in 1995 during the dot-com bubble, and was soon
upgraded to a business due to high volume to the website. In 1997, the name was changed to eBay after Omidyar’s
consulting firm, Echo Bay Technology Group. By then, it was hosting over two million auctions per year; when the
company went public in 1998, the share price skyrocketed to $53.50 on the first day, blowing past the original target price
of $18. Today, eBay is made up of three segments: Marketplace, Payments, and ebay Enterprise.

Industry Overview

eBay operates in a highly competitive, growing industry. Demand is dependent on consumer income. Growth comes
from an expanding U.S. and international retail market, and from increased internet access. Currently, 80% of U.S.
households have internet access, so there is opportunity for increased internet access in the U.S.

The increasing use of mobile devices is an excellent opportunity for eBay. By 2017, a quarter of e-commerce sales will be
through mobile devices.

E-commerce websites are facing increased competition from brick-and-mortar retailers, which are acknowledging that
online sales are an integral part of their survival. Indeed, eBay understands that the future of retail lies in creating a seamless
experience for customers online, on the go, and in physical retail environments.

As brick-and-mortar retailers move online, and as entrepreneurs seek to start new online retail sites, there is increasing
demand for hosting and fulfillment services. This is a segment that is served by companies such as eBay Enterprise. There
are three types of e-commerce platforms: hosted, open-source, and hosted shopping cart. Hosted e-commerce platforms
allow an entrepreneur to focus only on product selection, while the hosted platform provider deals with website hosting and
security, digital payments, and fulfillment services. Open-source e-commerce platforms often give less help to
entrepreneurs because they are open-source and are usually not run by a specific company. Lastly, hosted shopping cart
platforms only provide the technology of the shopping cart feature on retail websites that are hosted elsewhere.

Digital payment processing is becoming increasingly important both online and in the physical world. Digital payment
processing is important online, in retail stores, and in other industries such as transportation and entertainment. Wireless
point of sale terminals give flexibility and convenience to merchants and customers. Square debuted a credit card reader that
can be plugged into a tablet or smartphone, and eBay’s PayPal brand recently released a competing product, PayPal Here.
eBay’s PayPal brand dominates the digital payments market with 40% market share.

4
 eBay Revenue Breakdown

While Marketplace is currently the largest percentage of revenue, it is the Payments revenue that is growing most quickly,
and has the most market share. While PayPal operates in 193 countries and with 26 currencies, it is clear that most of
eBay’s overall revenue comes from the U.S. This means that eBay has an opportunity to expand further into international
markets.

5
 Company Overview

eBay began as an online auction website, so Marketplace was its first segment. eBay acquired StubHub in January
2007. StubHub provides “fans a safe, convenient place to get tickets to the games, concerts, and theatre shows they want to
see, and an easy way to sell their tickets when they can’t go.” It is the world’s largest ticket marketplace. In 2000, eBay
purchased Half.com. This site is one where all listings are fixed-price, and listings are limited to books, music, movies,
video games, and video game consoles. In other words, this site is for selling standardized media products, not rare, old, or
collectible items.

eBay’s most successful product from a market share perspective is PayPal. As mentioned before, it is a leader in the digital
payment services market, with 40% market share. PayPal is an international e-commerce business allowing payments and
money transfers to be made through the Internet. It performs payment processing for online vendors, auction sites, and other
commercial users, for which it charges a fee. PayPal is an important part of eBay because it is part of the unique offering of
the eBay Marketplace, as it is the exclusive payment processor on eBay Marketplace. Marketplace has also been an
excellent source of customers for PayPal. PayPal is weaning itself off of reliance on Marketplace for customers.

BillMeLater is a service that became a part of PayPal when it was acquired in 2008. It offers consumers a line of revolving
credit through Comenity Community Bank. It allows purchases to be made online without using a credit card. This is very
convenient because it can be accessed on a number of websites, and through PayPal.

Zong is another PayPal service that allows purchases to be made with just one’s cell phone number. The purchase shows up
on one’s cell phone bill. Overall, PayPal offers a number of services that make payment seamless and secure in many
different scenarios. It enjoys having first-mover advantage, a large customer base, and strong brand recognition.

eBay bought GSI Commerce in 2011, and subsequently renamed it eBay Enterprise. “eBay Enterprise is a leading provider
of commerce technologies, omnichannel operations and marketing solutions for the world’s premier retailers and brands.”
The diverse team of creative professionals delivers “insightful ideas that spark chain reactions of brand engagement,
transaction and loyalty.”

One segment of Enterprise services is Omnichannel Operations, which includes order management and inventory
management systems; as well as website hosting services. This segment also includes payment processing and fraud
management.

eBay Enterprise can leverage these capabilities to also provide commerce technologies to its clients. These interfaces and
tools include content and experience management; testing & optimization; and campaigns & promotions. For example, the
Interfaces & Tools Module can provide seamless, engaging commerce experiences across all retail interfaces including web,
smartphone, tablet, in-store associates, in-store self service experiences and customer service. eBay’s goal is to provide a
seamless shopping experience both on- and off-line.

A few of eBay’s many peers include Amazon.com, Alibaba, and Google. Amazon.com is an online retailer that has 14.9%
market share in the e-commerce industry. By comparison, eBay’s market share is only 2.6%. While Amazon has much
higher revenue than eBay, Amazon invests very heavily in its business, so eBay has higher net income free cash flow.

Alibaba.com is a private Chinese e-commerce company that is larger than Amazon and eBay combined. Alibaba is 24%
owned by Yahoo.

Google competes with eBay’s Marketplace and Payments Segments. Google Shopping competes with eBay’s marketplaces,
and Google Wallet competes with PayPal. This is a risk for eBay, because Google has a lot of market share and very strong
brand recognition.

6
 Analysis of Historical Financial Data

Based on some of eBay’s five year ( 2009-2013) financial statements, we analyzed its operating and investing cash flows,
key indicators, and profitability.

This graph shows eBay’s operating and investing cash flow increase during the past five years.

This graph shows the trend of some eBay key indicators over the past five years, including EBIT, EBITDA, sales,
Enterprise value and market capitalization. All of them are increasing from 2009 to 2013, which shows the growth of the
company.

7
Despite the positive evidence shown in the previous two graphs, eBay shows no obvious increase in profitability over the
last five years.

The graph shows eBay’s profitability dropped during 2009 and increased during the year 2010, and reached a peak at the
beginning of year 2011. It dropped again during 2012, and did not show any sign of raising during 2013.

8
 Discounted Cash Flow Valuation

First, we modelled the income statement and portions of the balance sheet and statement of cash flows. eBay reports
revenue and cost of goods sold per segment, so the model includes growth drivers for the different segments, and many
lines are driven off of net revenue. The model is dynamic, and allows analysis on the Base Case, Upside Case and
Downside Case.

WACC Calculation

Cost  of  Equity

Source
Risk  Free  Rate 2.64%
Equity  Risk  Premium 7.13%
Beta 0.98
Cost  of  Equity 9.63%

Effective  Tax  Rate  2013 18.00%

1  -­‐  Effective  Tax  Rate 82.00%

EV  Weight Cost  of  Debt

Price  Per  Share  -­‐  4/30/2014 $                                                                      51.83
Shares  Outstanding  as  of  January  24,  2014 1,294,654,966
Market  V alue  of  Equity $                    67,101,966,887.78 94.20%
Short-­‐Term  Debt  (millions) $                                          4,000,000.00 0.01% 0.41%
Long-­‐Term  Debt  (millions) $                          4,124,000,000.00 5.79% 2.64%
Enterprise  V alue $                    71,229,966,887.78

WACC 9.195% Sources:  Bloomberg,  e Bay  2 013  1 0-­‐K

Base Case Discounted Cash Flow Valuation

Price Per Share: $47.05

Discounted  Cash  Flow  Valuation

Current  Cash  &  Equivalents $                      7,844.00
WACC 9.19482%
Shares  Outstanding  on  January  24,  2014 1,294,654,966
Return  on  Invested  Capital  FY  2013 13.21%
Terminal  Growth  Rate 3.0%
2013A 2014E 2015E 2016E 2017E 2018E
Firm  Free  Cash  Flow $        3,361.72 $            2,200.05 $              2,407.10 $              2,651.23 $              2,923.96 $              3,226.42
Terminal  Value $          75,879.45
CF  +  TV $        3,361.72 $            2,200.05 $              2,407.10 $              2,651.23 $              2,923.96 $          79,105.86
Enterprise  Value $57,186.45
Equity  Value $60,908.45
Price  Per  Share $47.05 Sources:  Bloomberg,  e Bay  2 013  1 0-­‐K,  e Bay  Q1  2 014  results

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 Base Case DCF Sensitivity Analysis

Discounted  Cash  Flow  Sensitivity  Analysis

WACC
$47.05 7% 8% 9% 9.19482% 10% 11%
Terminal  Growth  Rate 2.80% $            71.75 $                                  57.60 $                    48.06 $                      46.55 $                    41.21 $                        36.06
2.90% $            72.67 $                                  58.08 $                    48.33 $                      46.80 $                    41.36 $                        36.15
3% $            73.62 $                                  58.58 $                    48.61 $                      47.05 $                    41.52 $                        36.24
3.10% $            74.62 $                                  59.11 $                    48.90 $                      47.30 $                    41.68 $                        36.33
3.20% $            75.68 $                                  59.65 $                    49.19 $                      47.57 $                    41.85 $                        36.42

10
 Relative Valuation

Starting on a Bloomberg terminal and adding and cutting companies, we choose eight comparable companies based
on industry (using SIC) and size (market capital). They are American Express Co, Mastercard Inc., Visa Inc., Wal-mart
Stores, Inc., Capital One financial Corp., Amazon.com Inc., Google Inc. and Priceline.com, Inc. While not all of these
companies are listed in exactly the same SIC category, this is because they operated in multiple industries. This blend
allows for a valuation of eBay off of retail, online shopping, and payments. We obtained several basic inputs for eBay for
the purpose of range price calculation, and they are sales, debt, cash, number of outstanding shares, EBITDA and EBIT.

The multiples we use to forecast the target prices are: EV/EBITDA, EV/EBIT, EV/Sales and P/E. We chose them because
P/E is a historically popular multiple; EV/EBITDA is very popular and commonly-used multiple; EV/Sales is usually used
for high technology companies and retail; and EV/EBIT, though similar to EV/EBITDA , adds another level of analysis.
Based on the comparable companies relative valuation, eBay’s target price range is $41 to 67. The average target price is
$56.54.

INPUTS OUTPUT
LTM  Sales $ 16,561.00 Max  price $        67.00
Debt  3/31/2014 $        4,128.00 Min  price $        41.00
Cash  and  cash  e quivalents  3/31/2014 $        4,415.00 Target  price $        56.54
Shares  Outstanding  12/31/2013  (millions) 1294
LTM  EBITDA $ 4,902.00
EBIT $ 3,449.00
eBay  EPS  FY  2013 $                        2.20
Sources:  Bloomberg,  e Bay  Q1  2 014  results

Name EV/EBITDA EV/EBIT EV/Sales P/E

AMERICAN  EXPRESS  CO 14.72 13.67 3.74 17.00
MASTERCARD  INC-­‐CLASS  A 14.40 15.26 8.61 28.00
VISA  INC-­‐CLASS  A  SHARES 17.55 18.50 11.69 24.00
WALMART 8.27 11.02 0.64 16.00
CAPITAL  ONE  FINANCIAL  CORP 10.79 10.88 3.03 9.80
AMAZON.COM  INC 20.80 95.68 1.48 493.00
GOOGLE 11.57 15.51 5.78 29.00
PRICELINE 16.57 17.29 6.61 32.00
Median 14.56 15.39 4.76 26.00
Mean 14.33 24.73 5.20 22.73
Note: P/E mean ratio does not include Amazon.

EV/Sales EV/EBITDA EV/EBIT P/E

EV  Median $  78,789.61 $  71,378.47 $  53,067.00
EV  Mean $  86,050.89 $  70,266.66 $  85,279.78
Equity  Median $  79,076.61 $  71,665.47 $  53,354.00
Equity  Mean $  86,337.89 $  70,553.66 $  85,566.78
Price  Median $                    61.11 $                    55.38 $                    41.23 $        57.20
Price  Mean $                    66.72 $                    54.52 $                    66.13 $        50.00

11
 Conclusion

At this time, we recommend a hold on this stock because it is trading around its fair value, as calculated in the DCF
valuation, and in the relative valuation.

Current Price $52.35

Discounted Cash Flow Price Target $47.05
Relative Valuation Price Range $41 to $67
Relative Valuation Price Target $56.54
Average Price Target $51.80

Recommendation: Hold

References

Bloomberg
eBay 2013 10-K
eBay Q1 2014 Results
First Research
IBISWorld
U.S. Census Bureau

12
 Tables and Figures

1. Five-Year Balance Sheet from Bloomberg

Field FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

For the period ending 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013
original original original original original
Assets
Cash & Near Cash Items $ 3,999.82 $ 5,577.41 $ 4,691.10 $ 6,817.00 $ 4,494.00
Short-Term Investments $ 943.99 $ 1,045.40 $ 1,238.30 $ 2,591.00 $ 4,531.00
Accounts & Notes Receivable $ 407.51 $ 454.37 $ 681.59 $ 2,982.00 $ 899.00
Inventories $ - $ - $ - $ - $ -
Other Current Assets $ 3,108.90 $ 3,988.16 $ 6,050.46 $ 9,008.00 $ 13,359.00
Total Current Assets $ 8,460.21 $ 11,065.34 $ 12,661.45 $ 21,398.00 $ 23,283.00
LT Investments & LT Receivables $ 1,381.77 $ 2,492.01 $ 2,452.76 $ 3,044.00 $ 4,971.00
Net Fixed Assets $ 1,314.33 $ 1,523.33 $ 1,986.22 $ 2,491.00 $ 2,760.00
Gross Fixed Assets $ 3,316.33 $ 3,962.78 $ 4,876.78 $ 5,957.00 $ 7,120.00
Accumulated Depreciation $ 2,002.01 $ 2,439.45 $ 2,890.57 $ 3,466.00 $ 4,360.00
Other Long-Term Assets $ 7,252.02 $ 6,923.08 $ 10,219.79 $ 10,141.00 $ 10,474.00
Total Long-Term Assets $ 9,948.11 $ 10,938.42 $ 14,658.76 $ 15,676.00 $ 18,205.00
Total Assets $ 18,408.32 $ 22,003.76 $ 27,320.22 $ 37,074.00 $ 41,488.00

Liabilities & Shareholders' Equity

Accounts Payable $ 192.41 $ 184.96 $ 283.10 $ 301.00 $ 309.00
Short-Term Borrowings $ - $ 300.00 $ 564.60 $ 413.00 $ 6.00
Other Short-Term Liabilities $ 3,449.56 $ 4,031.55 $ 5,886.50 $ 10,210.00 $ 12,324.00
Total Current Liabilities $ 3,641.97 $ 4,516.51 $ 6,734.20 $ 10,924.00 $ 12,639.00
Long-Term Borrowings $ - $ 1,494.23 $ 1,525.05 $ 4,106.00 $ 4,117.00
Other Long-Term Liabilities $ 978.70 $ 690.84 $ 1,131.09 $ 1,179.00 $ 1,085.00
Total Long-Term Liabilities $ 978.70 $ 2,185.07 $ 2,656.14 $ 5,285.00 $ 5,202.00
Total Liabilities $ 4,620.67 $ 6,701.58 $ 9,390.34 $ 16,209.00 $ 17,841.00
Total Preferred Equity $ - $ - $ - $ - $ -
Minority Interest $ - $ - $ - $ - $ -
Share Capital & APIC $ 9,987.69 $ 10,482.22 $ 11,146.37 $ 12,064.00 $ 13,033.00
Retained Earnings & Other Equity $ 3,799.96 $ 4,819.96 $ 6,783.51 $ 8,801.00 $ 10,614.00
Total Equity $ 13,787.65 $ 15,302.18 $ 17,929.88 $ 20,865.00 $ 23,647.00
Total Liabilities & Equity $ 18,408.32 $ 22,003.76 $ 27,320.22 $ 37,074.00 $ 41,488.00

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 2. Five-Year Cash Flow Statement from Bloomberg

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Cash From Operating Activities
Net Income 2389.097 1800.961 3229.387 2609 2856
Depreciation & Amortization 810.946 762.465 939.953 1200 1400
Other Non-Cash Adjustments -543.824 1155.414 -593.833 689 985
Changes in Non-Cash Capital 251.867 -973.08 -301.833 -660 -246
Cash From Operations 2908.086 2745.76 3273.674 3838 4995

Cash From Investing Activities

Disposal of Fixed Assets 0 0 0 0 0
Capital Expenditures -567.094 -723.912 -963.498 -1257 -1250
Increase in Investments 0 0 0 0 0
Decrease in Investments 0 0 0 0 0
Other Investing Activities -582.289 -1558.558 -2343.364 -2506 -4762
Cash From Investing Activities -1149.383 -2282.47 -3306.862 -3763 -6012

Cash from Financing Activities

Dividends Paid 0 0 0 0 0
Change in Short-Term Borrowings -1000 300 250 -550 -400
Increase in Long-Term Borrowings 0 1488.702 0 2976 0
Decrease In Long-Term Borrowings 0 0 -199.271 0 0
Increase in Capital Stocks 107.276 277.418 321.891 613 638
Decrease in Capital Stocks 0 -711.068 -1063.986 -898 -1343
Other Financing Activities -55.089 -240.749 -161.756 -90 -201
Cash from Financing Activities -947.813 1114.303 -853.122 2051 -1306
Net Changes in Cash 810.89 1577.593 -886.31 2126 -2323

Reference Items
EBITDA 2305.899 2837.473 3312.953 4088 4771
Trailing 12M EBITDA Margin 26.4215 30.9894 28.4333 29.0506 29.7314
Cash Paid for Taxes 342.173 645.783 372.528 789 466
Cash Paid for Interest 6.05 0.054 29.2 15 99
Net Cash Paid for Acquisitions 1209.433 90.568 3223.055 143 869
Tax Benefit from Stock Options 4.75 41.891 79.681 130 201
Free Cash Flow 2340.992 2021.848 2310.176 2581 3745
Free Cash Flow to Firm #N/A N/A #N/A N/A 2330.8488 2634.2967 3827.4005
Free Cash Flow to Equity 1340.992 3810.55 2360.905 5007 3345
Free Cash Flow per Basic Share 1.8149 1.5486 1.787 1.9977 2.8919
Price to Free Cash Flow 12.9646 17.971 16.9727 25.5285 18.972
Cash Flow to Net Income 1.2172 1.5246 1.0137 1.4711 1.7489

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Cash From Operations 2908.086 2745.76 3273.674 3838 4995
Cash From Investing Activities -1149.383 -2282.47 -3306.862 -3763 -6012

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3. Five-Year Income Statement from Bloomberg

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FQ4 2013

Revenue $ 8,727.36 $ 9,156.27 $ 11,651.65 $ 14,072.00 $ 16,047.00 $ 16,047.00
Cost of Revenue $ 2,479.76 $ 2,564.67 $ 3,460.18 $ 4,216.00 $ 5,036.00 $ 5,036.00
Gross Profit $ 6,247.60 $ 6,591.61 $ 8,191.47 $ 9,856.00 $ 11,011.00 $ 11,011.00
Operating Expenses $ 4,752.65 $ 4,516.60 $ 5,818.47 $ 6,968.00 $ 7,640.00 $ 7,640.00
Operating Income $ 1,494.95 $ 2,075.01 $ 2,373.00 $ 2,888.00 $ 3,371.00 $ 3,371.00
Interest Expense #N/A N/A #N/A N/A $ 25.03 $ 63.00 $ 100.00
Foreign Exchange Losses (Gains) $ - $ - $ - $ - #N/A N/A
Net Non-Operating Losses (Gains) $ (1,384.20) $ (23.44) $ (1,562.08) $ (259.00) $ (195.00) $ (95.00)
Pretax Income $ 2,879.15 $ 2,098.45 $ 3,910.05 $ 3,084.00 $ 3,466.00 $ 3,466.00
Income Tax Expense $ 490.05 $ 297.49 $ 680.66 $ 475.00 $ 610.00 $ 610.00
Income Before XO Items $ 2,389.10 $ 1,800.96 $ 3,229.39 $ 2,609.00 $ 2,856.00 $ 2,856.00
Extraordinary Loss Net of Tax $ - $ - $ - $ - $ - $ -
Minority Interests $ - $ - $ - $ - $ - $ -
Net Income $ 2,389.10 $ 1,800.96 $ 3,229.39 $ 2,609.00 $ 2,856.00 $ 2,856.00
Total Cash Preferred Dividends $ - $ - $ - $ - $ - $ -
Other Adjustments #N/A N/A $ - $ - $ - $ - $ -
Net Inc Avail to Common Shareholders $ 2,389.10 $ 1,800.96 $ 3,229.39 $ 2,609.00 $ 2,856.00 $ 2,856.00

Abnormal Losses (Gains) $ (1,026.08) $ 37.70 $ 277.88 $ (152.00) $ (72.00) $ (92.00)

Tax Effect on Abnormal Items $ 359.13 $ (13.19) $ (97.26) $ 53.20 $ 25.20
Normalized Income $ 1,722.15 $ 1,825.46 $ 3,410.01 $ 2,510.20 $ 2,809.20 $ 2,798.65

Basic EPS Before Abnormal Items $ 1.34 $ 1.40 $ 2.64 $ 1.94 $ 2.16 $ 2.16
Basic EPS Before XO Items $ 1.85 $ 1.38 $ 2.50 $ 2.02 $ 2.20 $ 2.20
Basic EPS $ 1.85 $ 1.38 $ 2.50 $ 2.02 $ 2.20 $ 2.20
Basic Weighted Avg Shares 1289.848 1305.593 1292.775 1292 1295 1295
Diluted EPS Before Abnormal Items $ 1.32 $ 1.38 $ 2.60 $ 1.91 $ 2.14 $ 2.13
Diluted EPS Before XO Items $ 1.83 $ 1.36 $ 2.46 $ 1.99 $ 2.18 $ 2.18
Diluted EPS $ 1.83 $ 1.36 $ 2.46 $ 1.99 $ 2.18 $ 2.18
Diluted Weighted Avg Shares 1304.981 1327.417 1312.95 1313 1313 1310

15
4. Income Statement model Base Case
Revenue 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Net  Marketplaces  Revenue 6642 7398 8284 $            9,207.61 $        10,262.16 $          11,463.54 $          12,829.75 $          14,381.22
Non-­‐vehicle  GMV 60332 67763 76495 $        86,352.21 $        97,479.64 $    110,040.95 $    124,220.92 $    140,228.14
Vehicle  GMV 8301 7613 6835 $            6,268.50 $              5,748.96 $              5,272.48 $              4,835.49 $              4,434.71
Net  GMV 68633 75376 83330 $        92,620.72 $    103,228.60 $    115,313.43 $    129,056.41 $    144,662.85
Net  Marketplaces  Revenue/Net  GMV 9.7% 9.8% 9.9% 9.9% 9.9% 9.9% 9.9% 9.9%
Net  Marketplaces  Revenue  Growth 11.4% 12.0% 11.1% 11.5% 11.7% 11.9% 12.1%

Net  Payments  Revenue 4412 5574 6628 $            8,407.90 $        10,706.21 $          13,681.15 $          17,540.42 $          22,556.84
Merchant  Services  TPV 77700 97277 125281 $    165,370.92 $    218,289.61 $    288,142.29 $    380,347.82 $    502,059.13
eBay  TPV 41058 47660 54382 $        62,539.30 $        71,920.20 $          82,708.22 $          95,114.46 $    109,381.63
Net  TPV 118758 144937 179663 227910.22 290209.8094 370850.5153 475462.282 611440.7544
Net  Payments  Revenue/Net  TPV 3.72% 3.85% 3.69% 3.69% 3.69% 3.69% 3.69% 3.69%
Net  Payments  Revenue  Growth 26.3% 18.9% 26.9% 27.3% 27.8% 28.2% 28.6%

Net  Enterprise  Revenue 590 1083 1112 $            1,256.56 $              1,419.91 $              1,604.50 $              1,813.09 $              2,048.79
Merchandise  Sales 2046 3682 4180 $            4,723.40 $              5,337.44 $              6,031.31 $              6,815.38 $              7,701.38
Net  Enterprise  Revenue/Merchandise  Sales 29% 29% 27% 27% 27% 27% 27% 27%

Net  Other  and  Eliminate  Intersegment 8 17 23 8 8 8 8 8

Total  Net  Revenues $  11,652.00 $      14,072.00 $  16,047.00 $        18,880.07 $        22,396.29 $          26,757.19 $          32,191.26 $          38,994.85
Total  Net  Revenues  Growth 20.8% 14.0% 17.7% 18.6% 19.5% 20.3% 21.1%

Cost  of  Net  Marketplaces  Revenue 1210 1273 1520 $            1,689.47 $              1,882.96 $              2,103.40 $              2,354.08 $              2,638.76
Cost  of  Net  Marketplaces  Revenue/Net  Marketplaces  Revenue 18.2% 17.2% 18.3% 18.3% 18.3% 18.3% 18.3% 18.3%
Cost  of  Net  Payments  Revenue 1866 2209 2675 $            3,393.35 $              4,320.93 $              5,521.59 $              7,079.15 $              9,103.73
Cost  of  Net  Payments  Revenue/Net  Payments  Revenue 42.3% 39.6% 40.4% 40.4% 40.4% 40.4% 40.4% 40.4%
Cost  of  Net  Enterprise  Revenue 374 696 821 $                    927.73 $              1,048.33 $              1,184.62 $              1,338.62 $              1,512.64
Cost  of  Net  Enterprise  Revenue/Net  Enterprise  Revenue 63.4% 64.3% 73.8% 73.8% 73.8% 73.8% 73.8% 73.8%
Cost  of  Other  Revenue 11 38 20 8 8 8 8 8
Cost  of  Other  Revenue/Net  Other  Revenues 137.5% 223.5% 87.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Total  Cost  of  Net  Revenues 3461 4216 5036 $            6,018.55 $              7,260.23 $              8,817.61 $          10,779.85 $          13,263.13
Total  Cost  of  Net  Revenues  Growth 22% 19% 20% 21% 21% 22% 23%

Gross  profit $        8,191.00 $          9,856.00 $  11,011.00 $        12,861.52 $        15,136.06 $          17,939.58 $          21,411.40 $          25,731.72
Gross  profit  growth 20% 12% 17% 18% 19% 19% 20%

Operating  expenses
Sales  and  marketing 2435 2913 3060 $            3,600.24 $              4,270.74 $              5,102.32 $              6,138.55 $              7,435.92
Sales  and  marketing/Net  revenues 20.9% 20.7% 19.1% 19.1% 19.1% 19.1% 19.1% 19.1%
Product  development 1235 1573 1768 $            2,080.14 $              2,467.54 $              2,948.01 $              3,546.72 $              4,296.31
Product  development/Net  revenues 10.6% 11.2% 11.0% 11.0% 11.0% 11.0% 11.0% 11.0%
General  and  administrative 1364 1567 1703 $            2,003.66 $              2,376.82 $              2,839.63 $              3,416.32 $              4,138.36
General  and  administrative/Net  revenues 11.7% 11.1% 10.6% 10.6% 10.6% 10.6% 10.6% 10.6%
Provision  for  transaction  and  l oan  l osses 517 580 791 $                    930.65 $              1,103.97 $              1,318.93 $              1,586.79 $              1,922.16
Provision  for  transaction  and  loan  losses/Net  revenues 4.4% 4.1% 4.9% 4.9% 4.9% 4.9% 4.9% 4.9%
Amortization  of  acquired  i ntangible  assets 267 335 318 $                    374.14 $                    443.82 $                      530.24 $                      637.93 $                      772.75
Amortization  of  acquired  intangible  assets/Net  Revenues 2.3% 2.4% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Total  operating  e xpenses $        5,818.00 $          6,968.00 $        7,640.00 $            8,988.83 $        10,662.90 $          12,739.14 $          15,326.30 $          18,565.50
Total  operating  e xpenses  growth 20% 10% 18% 19% 19% 20% 21%

Income  from  operations $        2,373.00 $          2,888.00 $        3,371.00 $            3,872.69 $              4,473.15 $              5,200.45 $              6,085.10 $              7,166.22
Income  from  operations  growth 22% 17% 15% 16% 16% 17% 18%

NOPAT $        1,959.70 $          2,443.19 $        2,777.72 $            3,191.11 $              3,685.90 $              4,285.19 $              5,014.15 $              5,904.99

Interest  and  other,  net 1537 196 95 $                    111.77 $                    132.59 $                      158.41 $                      190.58 $                      230.85
Interest  and  other,  net/Net  revenues 13.2% 1.4% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6%

Income  before  i ncome  taxes $        3,910.00 $          3,084.00 $        3,466.00 $            3,984.46 $              4,605.74 $              5,358.85 $              6,275.67 $              7,397.07
Income  before  income  taxes  growth -­‐21% 12% 15% 16% 16% 17% 18%
Provision  for  i ncome  taxes $            (681.00) $              (475.00) $            (610.00) $                    701.25 $                    810.59 $                      943.13 $              1,104.49 $              1,301.85
Provision  for  income  taxes/Income  before  income  taxes 17.4% 15.4% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6%

Net  income $        3,229.00 $          2,609.00 $        2,856.00 $            4,685.71 $              5,416.33 $              6,301.98 $              7,380.16 $              8,698.92

Net  i ncome  per  share:

Basic $                        2.50 $                          2.02 $                        2.21 $                              3.62 $                              4.18 $                              4.87 $                              5.70 $                              6.72
Diluted $                        2.46 $                          1.99 $                        2.18 $                              3.57 $                              4.13 $                              4.80 $                              5.62 $                              6.63
Weighted  average  shares:
Basic 1,293 1,292 1,295 1,295 1,295 1,295 1,295 1,295
Diluted 1,313 1,313 1,313 1,313 1,313 1,313 1,313 1,313

16
5. Working Capital and partial balance sheet model Base Case
(Note: Because cash and short-term assets were not projected forwards, we projected Net Working Capital as a percentage of
Net Revenue.)
Balance  Sheet  and  Working  Capital 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Assets
Current  Assets
Cash  and  Cash  Equivalents 4691 6817 4494
Short-­‐term  Investments 1238 2591 4531
Accounts  Receivable,  net 682 822 899 $            1,057.72 $              1,254.71 $              1,499.02 $              1,803.45 $              2,184.61
Days  Sales  Outstanding 21.36 21.32 20.45 20.45 20.45 20.45 20.45 20.45
Loans  and  Interest  Receivable,  net 1501 2160 2789 $            3,281.39 $              3,892.52 $              4,650.45 $              5,594.90 $              6,777.38
Loans  and  Interest  Receivable,  net/Net  Revenue 12.9% 15.3% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4%
Funds  Receivable  and  Customer  Accounts 3968 8094 9260 $        10,894.84 $        12,923.89 $          15,440.37 $          18,576.12 $          22,502.17
Funds  Receivable  and  Customer  Accounts/Net  Revenue 34.1% 57.5% 57.7% 57.7% 57.7% 57.7% 57.7% 57.7%
Other  Current  Assets 581 914 1310 $            1,541.28 $              1,828.33 $              2,184.33 $              2,627.94 $              3,183.35
Other  Current  Assets/Net  revenue 5.0% 6.5% 8.2% 8.2% 8.2% 8.2% 8.2% 8.2%
Total  Current  Assets $  12,661.00 $      21,398.00 $  23,283.00 $        16,775.23 $        19,899.44 $          23,774.17 $          28,602.41 $          34,647.51

Long-­‐term  i nvestments 3044 4971 $            5,848.62 $              6,937.87 $              8,288.78 $              9,972.13 $          12,079.73

Long-­‐term  investments/Total  Net  Revenues 21.6% 31.0% 31.0% 31.0% 31.0% 31.0% 31.0%
Property  and  e quipment,  net 2491 2760 $            3,247.27 $              3,852.04 $              4,602.10 $              5,536.73 $              6,706.91
Property  and  equipment,  net/Total  Net  Revenues 17.7% 17.2% 17.2% 17.2% 17.2% 17.2% 17.2%
Goodwill 8537 9267 $        10,903.07 $        12,933.66 $          15,452.04 $          18,590.16 $          22,519.18
Goodwill/Total  Net  Revenues 60.7% 57.7% 57.7% 57.7% 57.7% 57.7% 57.7%
Intangible  assets,  net 1128 941 $            1,107.13 $              1,313.32 $              1,569.05 $              1,887.70 $              2,286.67
Intangible  assets,  net/Total  Net  Revenues 8.0% 5.9% 5.9% 5.9% 5.9% 5.9% 5.9%
Other  assets 476 266 $                    312.96 $                    371.25 $                      443.54 $                      533.61 $                      646.39
Other  assets/Total  Net  Revenues 3.4% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%
Total  assets $      37,074.00 $  41,488.00 $        38,194.29 $        45,307.57 $          54,129.66 $          65,122.75 $          78,886.38

Liabilities  and  Stockholder's  Equity

Current  Liabilities
Short-­‐term  Debt 565 413 5
Accounts  Payable $              282.00 $                  301.00 $              309.00 $                    369.29 $                    445.47 $                      541.03 $                      661.43 $                      813.80
Days  Payable  Outstanding 29.74 26.06 22.40 22.40 22.40 22.40 22.40 22.40
Funds  Payable  and  Amounts  Due  to  Customers $        3,968.00 $          8,094.00 $        9,260.00 $        10,894.84 $        12,923.89 $          15,440.37 $          18,576.12 $          22,502.17
Funds  Payable  and  Amounts  Due  to  Customers/Net  Revenue 34.1% 57.5% 57.7% 57.7% 57.7% 57.7% 57.7% 57.7%
Accrued  Expenses  and  Other  Current  Liabilities $        1,511.00 $          1,916.00 $        2,799.00 $            3,293.16 $              3,906.48 $              4,667.13 $              5,614.96 $              6,801.68
Accrued  Expenses  and  Other  Current  Liabilities/Net  Revenue 13.0% 13.6% 17.4% 17.4% 17.4% 17.4% 17.4% 17.4%
Deferred  Revenue $              110.00 $                  137.00 $              158.00 $                    185.89 $                    220.52 $                      263.45 $                      316.96 $                      383.95
Deferred  Revenue/Net  Revenue 0.94% 0.97% 0.98% 0.98% 0.98% 0.98% 0.98% 0.98%
Income  Taxes  Payable $              298.00 $                      63.00 $              107.00 $                    125.89 $                    149.34 $                      178.41 $                      214.65 $                      260.01
Income  Taxes  Payable/Net  Revenue 2.6% 0.4% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7%
Total  Current  Liabilities $        6,734.00 $      10,924.00 $  12,638.00 $        14,869.07 $        17,645.69 $          21,090.40 $          25,384.13 $          30,761.61

Deferred  and  other  tax  l iabilities,  net $                  972.00 $              841.00 $                    989.48 $              1,173.76 $              1,402.31 $              1,687.10 $              2,043.66
Deferred  and  other  tax  liabilities,  net/Total  Net  Revenues 6.9% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2%
Long-­‐term  debt 4106 4117 4117 $              3,268.00 $              3,268.00 $              1,000.00 $              1,000.00
Other  l iabilities 207 244 $                    287.08 $                    340.54 $                      406.85 $                      489.48 $                      592.93
Other  liabilities/Total  Net  Revenues 1.47% 1.52% 1.52% 1.52% 1.52% 1.52% 1.52%
Total  Liabilities $      16,209.00 $  17,840.00 $        20,262.62 $        22,427.99 $          26,167.55 $          28,560.70 $          34,398.20

Commitments  and  contingencies  ( Note  11)

Stockholder's  e quity:
Common  stock,  $0.001  par  value;  3,580  
shares  authorized;  1,294  and  1,294  shares  
Additional  paid-­‐in  capital
Treasury  stock  at  cost,  296  and  271  shares
Retained  e arnings
Accumulated  other  comprehensive  i ncome
Total  stockholders'  e quity
Total  l iabilities  and  stockholder's  e quity

Net  Working  Capital $        5,927.00 $      10,474.00 $  10,645.00 $        12,524.36 $        14,856.89 $          17,749.75 $          21,354.52 $          25,867.77
Net  Working  Capital/Net  Revenue 51% 74% 66% 66% 66% 66% 66% 66%
Change  i n  Net  Working  Capital $          4,547.00 $              171.00 $            1,879.36 $              2,332.53 $              2,892.87 $              3,604.76 $              4,513.26

Carrying  V alue  
as  of  December  
Long-­‐Term  Debt  due  in  the  next  three  years 31,  2013
Senior  notes  due  2015 $                            599.00
Senior  notes  due  2015 $                            250.00
Senior  notes  due  2017 $                      1,000.00

17
6. Depreciation and Capital Expenditures – Base Case
Provision  for  Transaction  and  Loan  Losses 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Depreciation  and  Amortization $              940.00 $          1,200.00 $        1,400.00 $            1,647.17 $              1,953.94 $              2,334.40 $              2,808.49 $              3,402.06
Depreciation  and  Amortization/PP&E+Intangible  Assets 33.2% 37.8% 37.8% 37.8% 37.8% 37.8% 37.8%

Cash  Flows  From  Investing  Activities

Purchases  of  Property  and  Equipment $        1,250.00 $          1,257.00 $              963.00 $            1,133.02 $              1,344.03 $              1,605.73 $              1,931.84 $              2,340.13
Purchases  of  Property  and  Equipment/Net  Revenue 10.7% 8.9% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

7. Discounted Cash Flow Analysis – Base Case

Discounted  Cash  Flow  Valuation
Current  Cash  &  Equivalents $                                7,844.00
WACC 9.19482%
Shares  Outstanding  on  January  24,  2014 1,294,654,966
Return  on  Invested  Capital  FY  2013 13.21%
Terminal  Growth  Rate 3.0%
2013A 2014E 2015E 2016E 2017E 2018E
Firm  Free  Cash  Flow $        3,361.72 $            2,200.05 $              2,407.10 $              2,651.23 $              2,923.96 $              3,226.42
Terminal  V alue $          75,879.45
CF  +  TV $        3,361.72 $            2,200.05 $              2,407.10 $              2,651.23 $              2,923.96 $          79,105.86
Enterprise  V alue $57,186.45
Equity  V alue $60,908.45
Price  Per  Share $47.05 Sources:  Bloomberg,  e Bay  2 013  1 0-­‐K,  e Bay  Q1  2 014  results

Discounted  Cash  Flow  Sensitivity  Analysis

WACC
$47.05 7% 8% 9% 9.19482% 10% 11%
Terminal  Growth  Rate 2.80% $            71.75 $                                  57.60 $                    48.06 $                      46.55 $                    41.21 $                        36.06
2.90% $            72.67 $                                  58.08 $                    48.33 $                      46.80 $                    41.36 $                        36.15
3% $            73.62 $                                  58.58 $                    48.61 $                      47.05 $                    41.52 $                        36.24
3.10% $            74.62 $                                  59.11 $                    48.90 $                      47.30 $                    41.68 $                        36.33
3.20% $            75.68 $                                  59.65 $                    49.19 $                      47.57 $                    41.85 $                        36.42

8. Weighted Average Cost of Capital

Cost  of  Equity

Source
Risk  Free  Rate 2.64%
Equity  Risk  Premium 7.13%
Beta 0.98
Cost  of  Equity 9.63%

Effective  Tax  Rate  2013 18.00%

1  -­‐  Effective  Tax  Rate 82.00%

EV  Weight Cost  of  Debt

Price  Per  Share  -­‐  4/30/2014 $                                                                      51.83
Shares  Outstanding  as  of  January  24,  2014 1,294,654,966
Market  V alue  of  Equity $                    67,101,966,887.78 94.20%
Short-­‐Term  Debt  (millions) $                                          4,000,000.00 0.01% 0.41%
Long-­‐Term  Debt  (millions) $                          4,124,000,000.00 5.79% 2.64%
Enterprise  V alue $                    71,229,966,887.78

WACC 9.195% Sources:  Bloomberg,  e Bay  2 013  1 0-­‐K

18
9. Comparable Companies Relative Valuation

INPUTS OUTPUT
LTM  Sales $ 16,561.00 Max  price $        67.00
Debt  3/31/2014 $        4,128.00 Min  price $        41.00
Cash  and  cash  e quivalents  3/31/2014 $        4,415.00 Target  price $        56.54
Shares  Outstanding  12/31/2013  (millions) 1294
LTM  EBITDA $ 4,902.00
EBIT $ 3,449.00
eBay  EPS  FY  2013 $                        2.20
Sources:  Bloomberg,  e Bay  Q1  2 014  results

Name EV/EBITDA EV/EBIT EV/Sales P/E

AMERICAN  EXPRESS  CO 14.72 13.67 3.74 17.00
MASTERCARD  INC-­‐CLASS  A 14.40 15.26 8.61 28.00
VISA  INC-­‐CLASS  A  SHARES 17.55 18.50 11.69 24.00
WALMART 8.27 11.02 0.64 16.00
CAPITAL  ONE  FINANCIAL  CORP 10.79 10.88 3.03 9.80
AMAZON.COM  INC 20.80 95.68 1.48 493.00
GOOGLE 11.57 15.51 5.78 29.00
PRICELINE 16.57 17.29 6.61 32.00
Median 14.56 15.39 4.76 26.00
Mean 14.33 24.73 5.20 22.73
Note: P/E mean ratio does not include Amazon.

EV/Sales EV/EBITDA EV/EBIT P/E

EV  Median $  78,789.61 $  71,378.47 $  53,067.00
EV  Mean $  86,050.89 $  70,266.66 $  85,279.78
Equity  Median $  79,076.61 $  71,665.47 $  53,354.00
Equity  Mean $  86,337.89 $  70,553.66 $  85,566.78
Price  Median $                    61.11 $                    55.38 $                    41.23 $        57.20
Price  Mean $                    66.72 $                    54.52 $                    66.13 $        50.00

19
10. Income Statement Model Upside Case
(Note: This case was not used because it includes assumptions that would represent a material increase in all of eBay’s
financials, which is not very likely.)
Revenue 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Net  Marketplaces  Revenue 6642 7398 8284 $            9,286.43 $        10,371.59 $          11,605.14 $          13,005.95 $          14,595.33
Non-­‐vehicle  GMV 60332 67763 76495 $        86,439.35 $        97,676.47 $    110,374.41 $    124,723.08 $    140,937.08
Vehicle  GMV 8301 7613 6835 $            6,424.90 $              6,039.41 $              5,677.04 $              5,336.42 $              5,016.23
Net  GMV 68633 75376 83330 $        92,864.25 $    103,715.87 $    116,051.45 $    130,059.50 $    145,953.31
Net  Marketplaces  Revenue/Net  GMV 9.7% 9.8% 9.9% 10.0% 10.0% 10.0% 10.0% 10.0%
Net  Marketplaces  Revenue  Growth 11.4% 12.0% 12.1% 11.7% 11.9% 12.1% 12.2%

Net  Payments  Revenue 4412 5574 6628 $            8,883.93 $        11,469.42 $          14,864.01 $          19,331.55 $          25,223.80
Merchant  Services  TPV 77700 97277 125281 $    167,876.54 $    224,954.56 $    301,439.12 $    403,928.41 $    541,264.08
eBay  TPV 41058 47660 54382 $        63,126.46 $        73,277.00 $          85,059.71 $          98,737.05 $    114,613.67
Net  TPV 118758 144937 179663 231002.9982 298231.5619 386498.8293 502665.4686 655877.7439
Net  Payments  Revenue/Net  TPV 3.72% 3.85% 3.69% 3.85% 3.85% 3.85% 3.85% 3.85%
Net  Payments  Revenue  Growth 26.3% 18.9% 34.0% 29.1% 29.6% 30.1% 30.5%

Net  Enterprise  Revenue 590 1083 1112 $            1,426.20 $              1,654.39 $              1,919.09 $              2,226.14 $              2,582.33
Merchandise  Sales 2046 3682 4180 $            4,848.80 $              5,624.61 $              6,524.55 $              7,568.47 $              8,779.43
Net  Enterprise  Revenue/Merchandise  Sales 29% 29% 27% 29% 29% 29% 29% 29%

Net  Other  and  Eliminate  Intersegment 8 17 23 8 8 8 8 8

Total  Net  Revenues $  11,652.00 $      14,072.00 $  16,047.00 $        19,604.55 $        23,503.39 $          28,396.24 $          34,571.65 $          42,409.46
Total  Net  Revenues  Growth 20.8% 14.0% 22.2% 19.9% 20.8% 21.7% 22.7%

Cost  of  Net  Marketplaces  Revenue 1210 1273 1520 $            1,597.95 $              1,784.68 $              1,996.94 $              2,237.98 $              2,511.47
Cost  of  Net  Marketplaces  Revenue/Net  Marketplaces  Revenue 18.2% 17.2% 18.3% 17.2% 17.2% 17.2% 17.2% 17.2%
Cost  of  Net  Payments  Revenue 1866 2209 2675 $            3,520.74 $              4,545.38 $              5,890.67 $              7,661.18 $              9,996.30
Cost  of  Net  Payments  Revenue/Net  Payments  Revenue 42.3% 39.6% 40.4% 39.6% 39.6% 39.6% 39.6% 39.6%
Cost  of  Net  Enterprise  Revenue 374 696 821 $                    904.06 $              1,048.71 $              1,216.51 $              1,411.15 $              1,636.93
Cost  of  Net  Enterprise  Revenue/Net  Enterprise  Revenue 63.4% 64.3% 73.8% 63.4% 63.4% 63.4% 63.4% 63.4%
Cost  of  Other  Revenue 11 38 20 6.956521739 6.956521739 6.956521739 6.956521739 6.956521739
Cost  of  Other  Revenue/Net  Other  Revenues 137.5% 223.5% 87.0% 87.0% 87.0% 87.0% 87.0% 87.0%
Total  Cost  of  Net  Revenues 3461 4216 5036 $            6,029.71 $              7,385.72 $              9,111.07 $          11,317.26 $          14,151.66
Total  Cost  of  Net  Revenues  Growth 22% 19% 20% 22% 23% 24% 25%

Gross  profit $        8,191.00 $          9,856.00 $  11,011.00 $        13,574.85 $        16,117.67 $          19,285.17 $          23,254.38 $          28,257.80
Gross  profit  growth 20% 12% 23% 19% 20% 21% 22%

Operating  e xpenses
Sales  and  marketing 2435 2913 3060 $            3,724.87 $              4,465.64 $              5,395.29 $              6,568.61 $              8,057.80
Sales  and  marketing/Net  revenues 20.9% 20.7% 19.1% 19.0% 19.0% 19.0% 19.0% 19.0%
Product  development 1235 1573 1768 $            2,077.89 $              2,491.13 $              3,009.73 $              3,664.26 $              4,495.00
Product  development/Net  revenues 10.6% 11.2% 11.0% 10.6% 10.6% 10.6% 10.6% 10.6%
General  and  administrative 1364 1567 1703 $            1,960.46 $              2,350.34 $              2,839.62 $              3,457.16 $              4,240.95
General  and  administrative/Net  revenues 11.7% 11.1% 10.6% 10.0% 10.0% 10.0% 10.0% 10.0%
Provision  for  transaction  and  l oan  l osses 517 580 791 $                    808.03 $                    968.73 $              1,170.40 $              1,424.93 $              1,747.97
Provision  for  transaction  and  loan  losses/Net  revenues 4.4% 4.1% 4.9% 4.1% 4.1% 4.1% 4.1% 4.1%
Amortization  of  acquired  i ntangible  assets 267 335 318 $                    372.49 $                    446.56 $                      539.53 $                      656.86 $                      805.78
Amortization  of  acquired  intangible  assets/Net  Revenues 2.3% 2.4% 2.0% 1.9% 1.9% 1.9% 1.9% 1.9%
Total  operating  e xpenses $        5,818.00 $          6,968.00 $        7,640.00 $            8,943.73 $        10,722.41 $          12,954.56 $          15,771.83 $          19,347.49
Total  operating  e xpenses  growth 20% 10% 17% 20% 21% 22% 23%

Income  from  operations $        2,373.00 $          2,888.00 $        3,371.00 $            4,631.11 $              5,395.26 $              6,330.61 $              7,482.56 $              8,910.31
Income  from  operations  growth 22% 17% 37% 17% 17% 18% 19%

NOPAT $        1,959.70 $          2,443.19 $        2,777.72 $            3,917.82 $              4,564.27 $              5,355.56 $              6,330.09 $              7,537.94

Interest  and  other,  net 1537 196 95 $                        98.02 $                    117.52 $                      141.98 $                      172.86 $                      212.05
Interest  and  other,  net/Net  revenues 13.2% 1.4% 0.6% 0.5% 0.5% 0.5% 0.5% 0.5%

Income  before  i ncome  taxes $        3,910.00 $          3,084.00 $        3,466.00 $            4,729.13 $              5,512.77 $              6,472.59 $              7,655.42 $              9,122.36
Income  before  income  taxes  growth -­‐21% 12% 36% 17% 17% 18% 19%
Provision  for  i ncome  taxes $            (681.00) $              (475.00) $            (610.00) $                    728.38 $                    849.08 $                      996.91 $              1,179.09 $              1,405.03
Provision  for  income  taxes/Income  before  income  taxes 17.4% 15.4% 17.6% 15.4% 15.4% 15.4% 15.4% 15.4%

Net  income $        3,229.00 $          2,609.00 $        2,856.00 $            5,457.52 $              6,361.85 $              7,469.50 $              8,834.51 $          10,527.39

Net  i ncome  per  share:

Basic $                        2.50 $                          2.02 $                        2.21 $                              4.21 $                              4.91 $                              5.77 $                              6.82 $                              8.13
Diluted $                        2.46 $                          1.99 $                        2.18 $                              4.16 $                              4.85 $                              5.69 $                              6.73 $                              8.02
Weighted  average  shares:
Basic 1,293 1,292 1,295 1,295 1,295 1,295 1,295 1,295
Diluted 1,313 1,313 1,313 1,313 1,313 1,313 1,313 1,313
20
11. Balance Sheet/Working Capital – Upside Case
Note: This model was not used because it would represent a material increase in eBay’s financial results. Cash and short-term
investments were not projected forwards, so Net Working Capital was projected off of Net Revenue.

Balance  Sheet  and  Working  Capital 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Assets
Current  Assets
Cash  and  Cash  Equivalents 4691 6817 4494
Short-­‐term  Investments 1238 2591 4531
Accounts  Receivable,  net 682 822 899 $            1,074.22 $              1,287.86 $              1,555.96 $              1,894.34 $              2,323.81
Days  Sales  Outstanding 21.36 21.32 20.45 20.00 20.00 20.00 20.00 20.00
Loans  and  Interest  Receivable,  net 1501 2160 2789 $            3,528.82 $              4,230.61 $              5,111.32 $              6,222.90 $              7,633.70
Loans  and  Interest  Receivable,  net/Net  Revenue 12.9% 15.3% 17.4% 18.0% 18.0% 18.0% 18.0% 18.0%
Funds  Receivable  and  Customer  Accounts 3968 8094 9260 $        11,762.73 $        14,102.03 $          17,037.74 $          20,742.99 $          25,445.68
Funds  Receivable  and  Customer  Accounts/Net  Revenue 34.1% 57.5% 57.7% 60.0% 60.0% 60.0% 60.0% 60.0%
Other  Current  Assets 581 914 1310 $            1,764.41 $              2,115.31 $              2,555.66 $              3,111.45 $              3,816.85
Other  Current  Assets/Net  revenue 5.0% 6.5% 8.2% 9.0% 9.0% 9.0% 9.0% 9.0%
Total  Current  Assets $  12,661.00 $      21,398.00 $  23,283.00 $        18,130.18 $        21,735.81 $          26,260.69 $          31,971.67 $          39,220.04

Long-­‐term  i nvestments 3044 4971 $            6,273.46 $              7,521.08 $              9,086.80 $          11,062.93 $          13,571.03

Long-­‐term  investments/Total  Net  Revenues 21.6% 31.0% 32.0% 32.0% 32.0% 32.0% 32.0%
Property  and  e quipment,  net 2491 2760 $            3,470.36 $              4,160.53 $              5,026.65 $              6,119.81 $              7,507.25
Property  and  equipment,  net/Total  Net  Revenues 17.7% 17.2% 17.7% 17.7% 17.7% 17.7% 17.7%
Goodwill 8537 9267 $        11,893.41 $        14,258.70 $          17,227.02 $          20,973.43 $          25,728.37
Goodwill/Total  Net  Revenues 60.7% 57.7% 60.7% 60.7% 60.7% 60.7% 60.7%
Intangible  assets,  net 1128 941 $            1,571.48 $              1,884.01 $              2,276.22 $              2,771.23 $              3,399.51
Intangible  assets,  net/Total  Net  Revenues 8.0% 5.9% 8.0% 8.0% 8.0% 8.0% 8.0%
Other  assets 476 266 $                    663.14 $                    795.03 $                      960.53 $              1,169.42 $              1,434.54
Other  assets/Total  Net  Revenues 3.4% 1.7% 3.4% 3.4% 3.4% 3.4% 3.4%
Total  assets $      37,074.00 $  41,488.00 $        42,002.04 $        50,355.16 $          60,837.91 $          74,068.49 $          90,860.73

Liabilities  and  Stockholder's  Equity

Current  Liabilities
Short-­‐term  Debt 565 413 5
Accounts  Payable $              282.00 $                  301.00 $              309.00 $                    491.30 $                    601.78 $                      742.36 $                      922.12 $              1,153.07
Days  Payable  Outstanding 29.74 26.06 22.40 29.74 29.74 29.74 29.74 29.74
Funds  Payable  and  Amounts  Due  to  Customers $        3,968.00 $          8,094.00 $        9,260.00 $            6,676.18 $              8,003.90 $              9,670.12 $          11,773.11 $          14,442.22
Funds  Payable  and  Amounts  Due  to  Customers/Net  Revenue 34.1% 57.5% 57.7% 34.1% 34.1% 34.1% 34.1% 34.1%
Accrued  Expenses  and  Other  Current  Liabilities $        1,511.00 $          1,916.00 $        2,799.00 $            2,542.27 $              3,047.86 $              3,682.35 $              4,483.16 $              5,499.54
Accrued  Expenses  and  Other  Current  Liabilities/Net  Revenue 13.0% 13.6% 17.4% 13.0% 13.0% 13.0% 13.0% 13.0%
Deferred  Revenue $              110.00 $                  137.00 $              158.00 $                    185.08 $                    221.88 $                      268.07 $                      326.37 $                      400.36
Deferred  Revenue/Net  Revenue 0.94% 0.97% 0.98% 0.94% 0.94% 0.94% 0.94% 0.94%
Income  Taxes  Payable $              298.00 $                      63.00 $              107.00 $                        87.77 $                    156.72 $                      127.13 $                      230.52 $                      189.87
Income  Taxes  Payable/Net  Revenue 2.6% 0.4% 0.7% 0.4% 0.7% 0.4% 0.7% 0.4%
Total  Current  Liabilities $        6,734.00 $      10,924.00 $  12,638.00 $            9,982.59 $        12,032.14 $          14,490.04 $          17,735.28 $          21,685.06

Deferred  and  other  tax  l iabilities,  net $                  972.00 $              841.00 $                    980.23 $              1,175.17 $              1,419.81 $              1,728.58 $              2,120.47
Deferred  and  other  tax  liabilities,  net/Total  Net  Revenues 6.9% 5.2% 5.0% 5.0% 5.0% 5.0% 5.0%
Long-­‐term  debt 4106 4117 4117 $              3,268.00 $              3,268.00 $              1,000.00 $              1,000.00
Other  l iabilities 207 244 $                    288.38 $                    345.74 $                      417.71 $                      508.55 $                      623.85
Other  liabilities/Total  Net  Revenues 1.47% 1.52% 1.47% 1.47% 1.47% 1.47% 1.47%
Total  Liabilities $      16,209.00 $  17,840.00 $        15,368.20 $        16,821.05 $          19,595.56 $          20,972.42 $          25,429.38

Commitments  and  contingencies  ( Note  11)

Stockholder's  e quity:
Common  stock,  $0.001  par  value;  3,580  
shares  authorized;  1,294  and  1,294  shares  
Additional  paid-­‐in  capital
Treasury  stock  at  cost,  296  and  271  shares
Retained  e arnings
Accumulated  other  comprehensive  i ncome
Total  stockholders'  e quity
Total  l iabilities  and  stockholder's  e quity

Net  Working  Capital $        5,927.00 $      10,474.00 $  10,645.00 $        14,591.96 $        17,493.92 $          21,135.75 $          25,732.19 $          31,566.00
Net  Working  Capital/Net  Revenue 51% 74% 66% 74% 74% 74% 74% 74%
Change  i n  Net  Working  Capital $          4,547.00 $              171.00 $            3,946.96 $              2,901.96 $              3,641.82 $              4,596.45 $              5,833.80

Carrying  V alue  as  

of  December  31,  
Long-­‐Term  Debt  due  in  the  next  three  years 2013
Senior  notes  due  2015 $                                        599.00
Senior  notes  due  2015 $                                        250.00
Senior  notes  due  2017 $                                1,000.00

21
 12. Depreciation, Amortization, Capital Expenditures – Upside Case
Provision  for  Transaction  and  Loan  Losses 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Depreciation  and  Amortization $              940.00 $          1,200.00 $        1,400.00 $            1,671.79 $              2,004.27 $              2,421.51 $              2,948.12 $              3,616.50
Depreciation  and  Amortization/PP&E+Intangible  Assets 33.2% 37.8% 33.2% 33.2% 33.2% 33.2% 33.2%

Cash  Flows  From  Investing  Activities

Purchases  of  Property  and  Equipment $        1,250.00 $          1,257.00 $              963.00 $                    980.23 $              1,175.17 $              1,419.81 $              1,728.58 $              2,120.47
Purchases  of  Property  and  Equipment/Net  Revenue 10.7% 8.9% 6.0% 5.0% 5.0% 5.0% 5.0% 5.0%

13. Discounted Cash Flow Valuation – Upside Case

Discounted  Cash  Flow  Valuation
Current  Cash  &  Equivalents $                                7,844.00
WACC 9.19482%
Shares  Outstanding  on  January  24,  2014 1,294,654,966
Return  on  Invested  Capital  FY  2013 13.21%
Terminal  Growth  Rate 3.0%
2013A 2014E 2015E 2016E 2017E 2018E
Firm  Free  Cash  Flow $        3,361.72 $            1,034.91 $              2,937.98 $              3,254.97 $              3,610.04 $              4,005.94
Terminal  V alue $          96,862.83
CF  +  TV $        3,361.72 $            1,034.91 $              2,937.98 $              3,254.97 $              3,610.04 $    100,868.76
Enterprise  V alue $70,321.83
Equity  V alue $74,043.83
Price  Per  Share $57.19 Sources:  Bloomberg,  e Bay  2 013  1 0-­‐K,  e Bay  Q1  2 014  results

Discounted  Cash  Flow  Sensitivity  Analysis

WACC
$57.19 7% 8% 9% 9.19482% 10% 11%
Terminal  Growth  Rate 2.80% $            88.65 $                                  70.62 $                    58.48 $                      56.56 $                    49.77 $                        43.24
2.90% $            89.81 $                                  71.24 $                    58.82 $                      56.87 $                    49.97 $                        43.35
3% $            91.03 $                                  71.88 $                    59.18 $                      57.19 $                    50.17 $                        43.46
3.10% $            92.31 $                                  72.54 $                    59.55 $                      57.52 $                    50.38 $                        43.58
3.20% $            93.66 $                                  73.23 $                    59.93 $                      57.86 $                    50.59 $                        43.69

22
14. Income Statement model – Downside Case
(Note: This model was not used, because the downside case represents a material decline in eBay’s performance, which is not
very likely in the next few years.)
Revenue 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Net  Marketplaces  Revenue 6642 7398 8284 $            8,745.06 $              9,690.80 $          10,766.45 $          11,986.63 $          13,367.93
Non-­‐vehicle  GMV 60332 67763 76495 $        85,916.77 $        96,499.01 $    108,384.64 $    121,734.21 $    136,728.03
Vehicle  GMV 8301 7613 6835 $            6,136.51 $              5,509.39 $              4,946.37 $              4,440.88 $              3,987.05
Net  GMV 68633 75376 83330 $        92,053.28 $    102,008.40 $    113,331.01 $    126,175.10 $    140,715.08
Net  Marketplaces  Revenue/Net  GMV 9.7% 9.8% 9.9% 9.5% 9.5% 9.5% 9.5% 9.5%
Net  Marketplaces  Revenue  Growth 11.4% 12.0% 5.6% 10.8% 11.1% 11.3% 11.5%

Net  Payments  Revenue 4412 5574 6628 $            6,412.52 $              7,640.55 $              9,116.82 $          10,893.31 $          13,033.13
Merchant  Services  TPV 77700 97277 125281 $    152,842.82 $    186,468.24 $    227,491.25 $    277,539.33 $    338,597.98
eBay  TPV 41058 47660 54382 $        60,907.84 $        68,216.78 $          76,402.79 $          85,571.13 $          95,839.67
Net  TPV 118758 144937 179663 213750.66 254685.0212 303894.0478 363110.4588 434437.6468
Net  Payments  Revenue/Net  TPV 3.72% 3.85% 3.69% 3.00% 3.00% 3.00% 3.00% 3.00%
Net  Payments  Revenue  Growth 26.3% 18.9% -­‐3.3% 19.2% 19.3% 19.5% 19.6%

Net  Enterprise  Revenue 590 1083 1112 $            1,057.54 $              1,163.29 $              1,279.62 $              1,407.59 $              1,548.34
Merchandise  Sales 2046 3682 4180 $            4,598.00 $              5,057.80 $              5,563.58 $              6,119.94 $              6,731.93
Net  Enterprise  Revenue/Merchandise  Sales 29% 29% 27% 23% 23% 23% 23% 23%

Net  Other  and  Eliminate  Intersegment 8 17 23 8 8 8 8 8

Total  Net  Revenues $  11,652.00 $      14,072.00 $  16,047.00 $        16,223.12 $        18,502.64 $          21,170.89 $          24,295.53 $          27,957.41
Total  Net  Revenues  Growth 20.8% 14.0% 1.1% 14.1% 14.4% 14.8% 15.1%

Cost  of  Net  Marketplaces  Revenue 1210 1273 1520 $            1,704.40 $              1,888.73 $              2,098.37 $              2,336.18 $              2,605.40
Cost  of  Net  Marketplaces  Revenue/Net  Marketplaces  Revenue 18.2% 17.2% 18.3% 19.5% 19.5% 19.5% 19.5% 19.5%
Cost  of  Net  Payments  Revenue 1866 2209 2675 $            2,757.38 $              3,285.44 $              3,920.23 $              4,684.12 $              5,604.25
Cost  of  Net  Payments  Revenue/Net  Payments  Revenue 42.3% 39.6% 40.4% 43.0% 43.0% 43.0% 43.0% 43.0%
Cost  of  Net  Enterprise  Revenue 374 696 821 $                    793.16 $                    872.47 $                      959.72 $              1,055.69 $              1,161.26
Cost  of  Net  Enterprise  Revenue/Net  Enterprise  Revenue 63.4% 64.3% 73.8% 75.0% 75.0% 75.0% 75.0% 75.0%
Cost  of  Other  Revenue 11 38 20 9.6 9.6 9.6 9.6 9.6
Cost  of  Other  Revenue/Net  Other  Revenues 137.5% 223.5% 87.0% 120.0% 120.0% 120.0% 120.0% 120.0%
Total  Cost  of  Net  Revenues 3461 4216 5036 $            5,264.54 $              6,056.23 $              6,987.92 $              8,085.60 $              9,380.50
Total  Cost  of  Net  Revenues  Growth 22% 19% 5% 15% 15% 16% 16%

Gross  profit $        8,191.00 $          9,856.00 $  11,011.00 $        10,958.58 $        12,446.41 $          14,182.97 $          16,209.94 $          18,576.91
Gross  profit  growth 20% 12% 0% 14% 14% 14% 15%

Operating  e xpenses
Sales  and  marketing 2435 2913 3060 $            3,390.26 $              3,866.63 $              4,424.23 $              5,077.21 $              5,842.45
Sales  and  marketing/Net  revenues 20.9% 20.7% 19.1% 20.9% 20.9% 20.9% 20.9% 20.9%
Product  development 1235 1573 1768 $            1,813.46 $              2,068.27 $              2,366.53 $              2,715.81 $              3,125.14
Product  development/Net  revenues 10.6% 11.2% 11.0% 11.2% 11.2% 11.2% 11.2% 11.2%
General  and  administrative 1364 1567 1703 $            1,899.10 $              2,165.95 $              2,478.30 $              2,844.07 $              3,272.73
General  and  administrative/Net  revenues 11.7% 11.1% 10.6% 11.7% 11.7% 11.7% 11.7% 11.7%
Provision  for  transaction  and  l oan  l osses 517 580 791 $                    827.38 $                    943.63 $              1,079.72 $              1,239.07 $              1,425.83
Provision  for  transaction  and  loan  losses/Net  revenues 4.4% 4.1% 4.9% 5.1% 5.1% 5.1% 5.1% 5.1%
Amortization  of  acquired  i ntangible  assets 267 335 318 $                    386.21 $                    440.48 $                      504.00 $                      578.38 $                      665.56
Amortization  of  acquired  intangible  assets/Net  Revenues 2.3% 2.4% 2.0% 2.4% 2.4% 2.4% 2.4% 2.4%
Total  operating  e xpenses $        5,818.00 $          6,968.00 $        7,640.00 $            8,316.41 $              9,484.95 $          10,852.77 $          12,454.54 $          14,331.72
Total  operating  e xpenses  growth 20% 10% 9% 14% 14% 15% 15%

Income  from  operations $        2,373.00 $          2,888.00 $        3,371.00 $            2,642.17 $              2,961.46 $              3,330.20 $              3,755.39 $              4,245.19
Income  from  operations  growth 22% 17% -­‐22% 12% 12% 13% 13%

NOPAT $        1,959.70 $          2,443.19 $        2,777.72 $            2,166.58 $              2,428.40 $              2,730.77 $              3,079.42 $              3,481.06

Interest  and  other,  net 1537 196 95 $            2,139.97 $              2,440.66 $              2,792.62 $              3,204.79 $              3,687.82
Interest  and  other,  net/Net  revenues 13.2% 1.4% 0.6% 13.2% 13.2% 13.2% 13.2% 13.2%

Income  before  i ncome  taxes $        3,910.00 $          3,084.00 $        3,466.00 $            4,782.14 $              5,402.12 $              6,122.83 $              6,960.19 $              7,933.01
Income  before  income  taxes  growth -­‐21% 12% 38% 13% 13% 14% 14%
Provision  for  i ncome  taxes $            (681.00) $              (475.00) $            (610.00) $                    860.79 $                    972.38 $              1,102.11 $              1,252.83 $              1,427.94
Provision  for  income  taxes/Income  before  income  taxes 17.4% 15.4% 17.6% 18.0% 18.0% 18.0% 18.0% 18.0%

Net  income $        3,229.00 $          2,609.00 $        2,856.00 $            5,642.93 $              6,374.50 $              7,224.94 $              8,213.02 $              9,360.96

Net  i ncome  per  share:

Basic $                        2.50 $                          2.02 $                        2.21 $                              4.36 $                              4.92 $                              5.58 $                              6.34 $                              7.23
Diluted $                        2.46 $                          1.99 $                        2.18 $                              4.30 $                              4.85 $                              5.50 $                              6.26 $                              7.13
Weighted  average  shares:
Basic 1,293 1,292 1,295 1,295 1,295 1,295 1,295 1,295
Diluted 1,313 1,313 1,313 1,313 1,313 1,313 1,313 1,313

23
15. Balance Sheet/Working Capital – Downside Case
Note: This model was not used, because the downside case represents a material decline in eBay’s performance, which is not
very likely in the next few years.
Balance  Sheet  and  Working  Capital 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Assets
Current  Assets
Cash  and  Cash  Equivalents 4691 6817 4494
Short-­‐term  Investments 1238 2591 4531
Accounts  Receivable,  net 682 822 899 $                    949.55 $              1,082.97 $              1,239.15 $              1,422.04 $              1,636.37
Days  Sales  Outstanding 21.36 21.32 20.45 21.36 21.36 21.36 21.36 21.36
Loans  and  Interest  Receivable,  net 1501 2160 2789 $            2,089.85 $              2,383.49 $              2,727.21 $              3,129.73 $              3,601.45
Loans  and  Interest  Receivable,  net/Net  Revenue 12.9% 15.3% 17.4% 12.9% 12.9% 12.9% 12.9% 12.9%
Funds  Receivable  and  Customer  Accounts 3968 8094 9260 $            5,524.66 $              6,300.93 $              7,209.59 $              8,273.66 $              9,520.68
Funds  Receivable  and  Customer  Accounts/Net  Revenue 34.1% 57.5% 57.7% 34.1% 34.1% 34.1% 34.1% 34.1%
Other  Current  Assets 581 914 1310 $                    808.93 $                    922.59 $              1,055.64 $              1,211.44 $              1,394.03
Other  Current  Assets/Net  revenue 5.0% 6.5% 8.2% 5.0% 5.0% 5.0% 5.0% 5.0%
Total  Current  Assets $  12,661.00 $      21,398.00 $  23,283.00 $            9,372.99 $        10,689.99 $          12,231.59 $          14,036.86 $          16,152.53

Long-­‐term  i nvestments 3044 4971 $            3,509.32 $              4,002.42 $              4,579.60 $              5,255.51 $              6,047.64

Long-­‐term  investments/Total  Net  Revenues 21.6% 31.0% 21.6% 21.6% 21.6% 21.6% 21.6%
Property  and  e quipment,  net 2491 2760 $            2,757.93 $              3,145.45 $              3,599.05 $              4,130.24 $              4,752.76
Property  and  equipment,  net/Total  Net  Revenues 17.7% 17.2% 17.0% 17.0% 17.0% 17.0% 17.0%
Goodwill 8537 9267 $            8,922.72 $        10,176.45 $          11,643.99 $          13,362.54 $          15,376.57
Goodwill/Total  Net  Revenues 60.7% 57.7% 55.0% 55.0% 55.0% 55.0% 55.0%
Intangible  assets,  net 1128 941 $                    811.16 $                    925.13 $              1,058.54 $              1,214.78 $              1,397.87
Intangible  assets,  net/Total  Net  Revenues 8.0% 5.9% 5.0% 5.0% 5.0% 5.0% 5.0%
Other  assets 476 266 $                    162.23 $                    185.03 $                      211.71 $                      242.96 $                      279.57
Other  assets/Total  Net  Revenues 3.4% 1.7% 1.0% 1.0% 1.0% 1.0% 1.0%
Total  assets $      37,074.00 $  41,488.00 $        25,536.34 $        29,124.47 $          33,324.49 $          38,242.89 $          44,006.94

Liabilities  and  Stockholder's  Equity

Current  Liabilities
Short-­‐term  Debt 565 413 5
Accounts  Payable $              282.00 $                  301.00 $              309.00 $                    288.47 $                    331.85 $                      382.90 $                      443.05 $                      514.00
Days  Payable  Outstanding 29.74 26.06 22.40 20.00 20.00 20.00 20.00 20.00
Funds  Payable  and  Amounts  Due  to  Customers $        3,968.00 $          8,094.00 $        9,260.00 $            9,409.41 $        10,731.53 $          12,279.12 $          14,091.41 $          16,215.30
Funds  Payable  and  Amounts  Due  to  Customers/Net  Revenue 34.1% 57.5% 57.7% 58.0% 58.0% 58.0% 58.0% 58.0%
Accrued  Expenses  and  Other  Current  Liabilities $        1,511.00 $          1,916.00 $        2,799.00 $            2,920.16 $              3,330.48 $              3,810.76 $              4,373.20 $              5,032.33
Accrued  Expenses  and  Other  Current  Liabilities/Net  Revenue 13.0% 13.6% 17.4% 18.0% 18.0% 18.0% 18.0% 18.0%
Deferred  Revenue $              110.00 $                  137.00 $              158.00 $                    162.23 $                    185.03 $                      211.71 $                      242.96 $                      279.57
Deferred  Revenue/Net  Revenue 0.94% 0.97% 0.98% 1.00% 1.00% 1.00% 1.00% 1.00%
Income  Taxes  Payable $              298.00 $                      63.00 $              107.00 $                    414.91 $                    473.21 $                      541.45 $                      621.36 $                      715.01
Income  Taxes  Payable/Net  Revenue 2.6% 0.4% 0.7% 2.6% 2.6% 2.6% 2.6% 2.6%
Total  Current  Liabilities $        6,734.00 $      10,924.00 $  12,638.00 $        13,195.18 $        15,052.09 $          17,225.93 $          19,771.97 $          22,756.21

Deferred  and  other  tax  l iabilities,  net $                  972.00 $              841.00 $            1,120.59 $              1,278.04 $              1,462.34 $              1,678.17 $              1,931.11
Deferred  and  other  tax  liabilities,  net/Total  Net  Revenues 6.9% 5.2% 6.9% 6.9% 6.9% 6.9% 6.9%
Long-­‐term  debt 4106 4117 4117 $              3,268.00 $              3,268.00 $              1,000.00 $              1,000.00
Other  l iabilities 207 244 $                    259.57 $                    296.04 $                      338.73 $                      388.73 $                      447.32
Other  liabilities/Total  Net  Revenues 1.47% 1.52% 1.60% 1.60% 1.60% 1.60% 1.60%
Total  Liabilities $      16,209.00 $  17,840.00 $        18,692.33 $        19,894.17 $          22,295.01 $          22,838.87 $          26,134.64

Commitments  and  contingencies  ( Note  11)

Stockholder's  e quity:
Common  stock,  $0.001  par  value;  3,580  
shares  authorized;  1,294  and  1,294  shares  
Additional  paid-­‐in  capital
Treasury  stock  at  cost,  296  and  271  shares
Retained  e arnings
Accumulated  other  comprehensive  i ncome
Total  stockholders'  e quity
Total  l iabilities  and  stockholder's  e quity

Net  Working  Capital $        5,927.00 $      10,474.00 $  10,645.00 $            8,252.18 $              9,411.70 $          10,768.96 $          12,358.36 $          14,221.04
Net  Working  Capital/Net  Revenue 51% 74% 66% 51% 51% 51% 51% 51%
Change  i n  Net  Working  Capital $          4,547.00 $              171.00 $          (2,392.82) $              1,159.52 $              1,357.25 $              1,589.41 $              1,862.68

Carrying  V alue  as  

of  December  31,  
Long-­‐Term  Debt  due  in  the  next  three  years 2013
Senior  notes  due  2015 $                                        599.00
Senior  notes  due  2015 $                                        250.00
Senior  notes  due  2017 $                                1,000.00

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 16. Depreciation, Amortization, Capital Expenditures – Downside Case
Note: This model was not used, because the downside case represents a material decline in eBay’s performance, which is not
very likely in the next few years.

Provision  for  Transaction  and  Loan  Losses 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E
Depreciation  and  Amortization $              940.00 $          1,200.00 $        1,400.00 $            1,356.25 $              1,546.82 $              1,769.89 $              2,031.11 $              2,337.24
Depreciation  and  Amortization/PP&E+Intangible  Assets 33.2% 37.8% 38.0% 38.0% 38.0% 38.0% 38.0%

Cash  Flows  From  Investing  Activities

Purchases  of  Property  and  Equipment $        1,250.00 $          1,257.00 $              963.00 $            1,740.38 $              1,984.92 $              2,271.16 $              2,606.37 $              2,999.21
Purchases  of  Property  and  Equipment/Net  Revenue 10.7% 8.9% 6.0% 10.7% 10.7% 10.7% 10.7% 10.7%

17. Discounted Cash Flow Analysis – Downside Case

Note: This model was not used, because the downside case represents a material decline in eBay’s performance, which is not
very likely in the next few years.

Discounted  Cash  Flow  Valuation

Current  Cash  &  Equivalents $                                7,844.00
WACC 9.19482%
Shares  Outstanding  on  January  24,  2014 1,294,654,966
Return  on  Invested  Capital  FY  2013 13.21%
Terminal  Growth  Rate 3.0%
2013A 2014E 2015E 2016E 2017E 2018E
Firm  Free  Cash  Flow $        3,361.72 $            4,561.48 $              1,271.25 $              1,376.23 $              1,493.14 $              1,621.97
Terminal  V alue $          44,731.72
CF  +  TV $        3,361.72 $            4,561.48 $              1,271.25 $              1,376.23 $              1,493.14 $          46,353.69
Enterprise  V alue $37,155.13
Equity  V alue $40,877.13
Price  Per  Share $31.57 Sources:  Bloomberg,  e Bay  2 013  1 0-­‐K,  e Bay  Q1  2 014  results

Discounted  Cash  Flow  Sensitivity  Analysis

WACC
$31.57 7% 8% 9% 9.19482% 10% 11%
Terminal  Growth  Rate 2.80% $            46.20 $                                  37.83 $                    32.18 $                      31.28 $                    28.11 $                        25.05
2.90% $            46.74 $                                  38.12 $                    32.34 $                      31.43 $                    28.20 $                        25.10
3% $            47.30 $                                  38.41 $                    32.50 $                      31.57 $                    28.29 $                        25.15
3.10% $            47.90 $                                  38.72 $                    32.67 $                      31.73 $                    28.39 $                        25.20
3.20% $            48.52 $                                  39.04 $                    32.85 $                      31.88 $                    28.49 $                        25.26

25