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Stock Analyst Update

Amid Internet Carnage, eBay Holds Up Well

Profitability matters after all, apparently.

Friday's market free-fall left a lot of red on the computer screens of stock watchers across the country. But one big name actually gained ground for the day: online-auction leader eBay (EBAY). Even as virtually all the Internet stocks plunged, some by as much as 20%, eBay inched up $0.75 to close the day in the black.

This performance highlights that eBay has held its value better than most Internet stocks during the market's recent declines. Even though it has fallen from the unsustainable levels it reached a few weeks ago, eBay's stock is still 100% above its 52-week low of last summer. In contrast, most e-tailing stocks are at or near their 52-week lows and down 80% to 90% from their highs. Even e-commerce bellwether (AMZN) is barely above its 52-week low after plummeting 30% this week.

Though it's hard to say exactly why this market behaves as it does, eBay's consistent profitability no doubt has a lot to do with the stock's solid performance. Investors are finally starting to wake up to the fact that even Internet companies eventually have to make money, and they're putting their money into the select few that aren't gushing red ink. Ebay still has a long way to go to justify its price, but at least it is in a better position than companies for whom profits are a distant dream.

David Kathman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.