Is TradeMe too boring to talk about?
I built up a large position on this stock over the last few days. I took advantage of the recent share price drop and decided to go big! It's now trading at the 200 day moving average. Volume today was solid. I noticed a large $8m or so order go through in the afternoon, most likely a large hedge or Kiwisaver fund. I believe it has strong support at this level as back in early July it bounced hard from this same price point.
In the past, I've never really taken any interest in this stock as I saw it as too boring. However, it's kind of just occurred to me that this stock is just ABSOLUTELY BLOODY CHEAP AND GOOD VALUE at this price!
The Amazon and Facebook threats are over emphasised.
Figures just out showed that Amazon sold a poultry $6.3 million in direct sales leading up to Christmas last year in Australia. Facebook Marketplace has been a flop and is fulled with scammers. Sure, I do believe that these two dominate players will eventually grow and become more relevant in NZ but you have to remember that online shopping is a very 'large pie' and growing 20% year on year. There's room for everybody and new players too.
TradeMe today is basically a classified business, not a second hand marketplace. There's very good growth from their Motors, Property, and Job listings. Overall, in my opinion, it's just a great little cash cow with a clean balance sheet and strong earnings, that will continue to outperform the market, albeit modestly over the medium to long term.
Compared to others like Seek or REA group, which is trading at a premium and lower yield, with false promises of better growth, the fact is that everybody seems to forget about little old NZ, unless of cause, it's milk. All things equal, if TradeMe was an "Australian brand", it would be trading much higher, regardless of growth potential. Look what happened to Xero when it left the NZX!
Ebay shares have been down over the cause of the year but still up alot over the long term. It's a different company with more competition in the classified space, and more risk exposure to the likes of Amazon and Facebook. With the recent appreciation of the USD dollar and $2b cash on hand, it could easily put in end to the almost 20 year monkey on it's back and finally acquire TradeMe - although highly unlikely and subject to OIO.
At the end of the day. You get a dividend yield of 6% with the benefit of decent growth and exposure as a tech play. Combined with a tightly run ship, low-ish overheads, and strong brand recognition, what's not to like about this stock? It deserves to be $5 I reckon and $6 12-18 months from now. End of year earnings results are due in 3 weeks. Time will tell.
Thoughts?
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