As anyone who shops online is well aware, today is Cyber Monday, the day where online retailers strut their best deals in order to capture more holiday shoppers.  The days following Thanksgiving are among the most important for the retail industry as many workers have those days off.  More recently, ecommerce sites have latched onto the concept in trying to grab market share and capture the attention of workers returning to their desks still with holiday shopping in mind.  Judging by the markets first reaction to retail stocks following the important weekend, it seems that increased traffic to ecommerce web sites has trumped the mixed results from bricks-and-mortar retail outlets.

Initial reports from bricks-and-mortar retail spending over the weekend are mixed as overall spending was up about .5%, but that is compared to very rough spending from a year ago when the U.S. financial system appeared to be near a meltdown.  In general, foot traffic was up but average spending was down.  Considering the fact that many retailers have shuttered stores in the last year (Circuit City and Linens ‘N Things come to mind), you would expect the remaining stores to have more shoppers all other things being equal.  According to the National Retail Federation, 195 million shoppers sought out discounts last weekend a 13% up-tick from last year.  However, shoppers were more disciplined spenders this year, on average spending $343 down 8% from a year ago and the lowest in four years.

A mixed picture indeed, as overall spending inched up but the shopping activity was likely limited beyond deeply discounted sale items and should put pressure on retail margins. In response to the results over the weekend, in Monday trading nearly all bricks-and-mortar retailer stocks suffered on the day with Saks (SKS), Macy’s (M), GameStop (GME) and Barnes and Noble (BKS) among the worst decliners.

In contrast, ecommerce sites like Amazon.com (AMZN) and eBay (EBAY) were treated to gains in Monday’s market action.  A survey by Shop.org states that 100 million Americans will shop online on Cyber Monday versus 85 million a year ago.  Ecommerce sites often offer no cost shipping and are afforded easy marketing through emailing promotions to existing customers.  Perhaps the biggest advantage is the hassle free shopping experience.  However, this year “Cyber Monday” deals started as early as Thanksgiving Day as there was really no reason to hold back sales for Monday.  Payment processing service Paypal, owned by eBay, said that its Black Friday transactions increased 20% from last year.

Clearly, ecommerce and bricks-and-mortar stores are not always at odds as many retailers like Best Buy (BBY) and Walmart (WMT) are increasing the percentage of sales derived online.  However, it is clear that the overall trend shows shoppers are logging-on more often and hitting the malls less.  This could mean additional concerns for commercial real estate going forward.  If early holiday shopping is an indication shoppers will likely continue looking for deals and are less likely to buy on impulse.  And you can bet that more consumers than ever will do most of this from the comfort of the web.

Bloomberg.com is highlighting the turnaround in sales for EBay’s (EBAY) online marketplace in their Chart of the Day.  The firm that pioneered the online auction process had reported sales declines for fixed-price items for at least twelve consecutive months dating back to July 2008 (the first month they were tracked by ChannelAdvisor), but retailers selling their goods on EBay have seen sales tick up in the past two months.  While this study is not comprehensive of all merchants on EBay, it is representative of an important step in the progression of EBay from an auction house to a focus on selling fixed price items as well.

Sales growth among the 3,000 merchants ChannelAdvisor tracks was driven by fixed-price sales, an area EBay Chief Executive Officer John Donahoe has emphasized as he tries to move the company beyond its roots as an auctioneer. EBay has reported three straight quarters of falling revenue as buyers and sellers fled to rival sites.

“It appears that EBay’s transition from a primarily auction format to a fixed-price format is finally at the point where the growth in fixed-price is making up for the decline in auction format, yielding an overall increase,” ChannelAdvisor CEO Scot Wingo said. — Bloomberg.com 10/7/2009 Chart of the Day

Consensus analysts’ estimates are calling for overall revenue growth from EBay of less than 1% in the third quarter.  The rise of fixed-price items is an encouraging trend as EBay’s auction business has started to drift away to lower cost competitors.  Whether this strategy will in fact be a winner for EBay is too early to tell, but analysts are becoming more bullish on the stock.  According to Yahoo Finance, upgrades outnumber downgrades 6 to 0 in the last six months, and earnings estimates for this year and the next are both trending higher.

At Ockham, we continue to believe that EBay is Greatly Undervalued at the current price level.  EBAY has been beaten down by the market, as there have been legitimate questions with regards to the business model.  EBay is starting to show that they are making strides in diversifying its business away from an auctioneer to a complete ecommerce powerhouse. 

For some time now, EBay has seemed sort of adrift at sea.  They undoubtedly have productive assets in the online marketplace and Paypal payment processing, and other assets that have great potential like Skype.  Now, evidence has started to emerge that the EBay’s somewhat painful transition is starting to work out, and that can only be good news to EBay investors.

The world’s largest online auctioneer, eBay (EBAY), reported first quarter earnings today.  So much of the attention has been focused on another outstanding quarter put out by Apple (AAPL) that eBay receives little more than a passing glance from some investors.  But eBay is trading much higher in after hours up more than 5.5% in addition to the 3.5% increase today.  The gang at CNBC’s Fast Money discussed which stock is the best internet retailer to invest in right now: Amazon (AMZN) or eBay.

“…You’ve got a company {AMZN} trading at a 30 multiple on top of that with revenue growth of only about 20%. To me there’s a lot better places to put your money. eBay, which reported after the close today, which we have an investment in, by comparison, they’re trading at 10 times. The stock’s up about 6% this I think there are a lot better places to put your money than to try to chase this and hope…

…The retail environment starting to weaken, et cetera. I mean, the stock’s up 50%. So if he thinks it’s going to go up another 50% from here, this, for me I’d rather own eBay at up 6%, thinking it can be up another 30% to 40% this year, which I think is totally valid. I don’t think we’re — we’re not disagreeing on Amazon being a great company over the next two or three years but from here I take eBay.”

Its not difficult to argue that eBay has the more attractive valuation considering the relative performance of the two stocks year to date.  As you can see from the Ockham historical valuation, we have liked eBay for some time, for better or worse.  Furthermore, Fast Money actually downplayed the difference in price-to-earnings ratios between the two.  Amazon, who will report earnings on Thursday, is expected to make about $1.50 per share for the year, which yields a basic P/E of more than 50.  Now, when you back out $8 per share in cash that the company had at the end of fiscal 2008 the multiple gets only slightly better at 47.

In contrast, eBay is comparatively much cheaper.  Prior to factoring in the first quarter results, eBay was anticipated to make $1.42 EPS for FY09, which puts the simple P/E multiple at just over 10.  Then granting eBay the same courtesy given to AMZN of backing out the $2.37 per share that the company has in cash on their balance sheet as of today’s announcement, and the result is a multiple under 9.  There is a significant difference in the way the market is valuing these two companies that are earning roughly the same amount per share.

Now, don’t misunderstand me, this is not an argument that these two companies should receive the same valuation multiples from the market.  After all they are different businesses with different strengthens and challenges.  eBay is dealing with declining revenue on a YoY basis as online auction traffic has dropped, while Amazon is still growing revenue impressively and has one of the hottest gadgets on the market, the Kindle.  However, for a value investor there is little doubt about which company looks more attractive at current price levels given the current fundamentals.  That is why eBay receives our Greatly Undervalued valuation, while Amazon for now is Fairly Valued. 

To invest in Amazon at current levels, is to believe that the market has not priced in the growth that the company is experiencing, which may in fact be true but seems less likely given the stocks awesome recent performance.  Clearly by Ockham’s methodology, in contrast to Amazon’s growth story, eBay has been beaten down in the market too much and offers far more value.

As you might expect, much of the conversation revolved around Obama’s latest announcement regarding the automakers, General Motors (GM) and Chrysler.  However, it was an active day for a lot of tech names as well with Intel (INTC) releasing a new server chip, Skype (EBAY) going on the iPhone (AAPL), and Disney (DIS) partnering up with Youtube (GOOG) to  provide clips from ESPN and ABC.  These stories and much more were discussed on today’s Closing Bell on CNBC.

For a daily recap of all stocks talked about on any of your favorite shows, visit Ockham.  RazorWire is the best way to stay on top of what is going on without the necessity of being near a television.

Ockham expects that the stock market’s short-term ride will continue to be a rocky one.  Corporate profits are plunging for many solid companies, but this is not the case for all.  There are still certain companies that are profiting in these difficult times.  For investors, there is a real danger in becoming too pessimistic right now.  Markets will inevitably revert to their norms and equity valuations have become undeniably appealing, especially for companies that are thriving despite the “Great Recession”.  We ended this week’s Enterprising Investor’s Guide newsletter with: “We will continue to recommend companies that are growing sales and earnings (there are still some out there) and companies whose balance sheets have gobs of cash and little debt.”  In this post, we review some of the companies that fit the criteria of being managed effectively through the downturn.

To start, IBM (IBM) announced excellent earnings today.  IBM has been quietly and diligently plugging away in the shadows of other Tech giants such as Google (GOOG) and Apple (AAPL).  The company managed to boost quarterly profits 17% year-over-year and recorded $8.93 per share in earnings for the full year.  What’s more, instead of cautiously guiding for the year ahead in light of what is widely expected to be a trying year, IBM raised its guidance.  Analysts expected to see IBM earn approximately $8.75 for fiscal 2009, but the company expects to earn a minimum of $9.20.  Whether this confidence is well-founded or foolish remains to be seen but we would like to see more companies be so bullish regarding the year ahead.  IBM also has nearly $13 billion in cash on hand should a compelling strategic acquisition materialize in 2009.  IBM’s top competitor HP (HPQ)–another company showing strong performance of late–is starting to reap the benefits of its merger with EDS.

Healthcare companies are often seen as recession-resistant because, for most consumers, it is not a discretionary expenditure but one of necessity.  Abbott Labs (ABT) just finished a very successful fiscal 2008.  In the last quarter, earnings and revenue results were in-line at $1.06 per share on $8 billion in sales.  These results are both double-digit percentage gains from the previous year and were boosted by strong sales in the Humira, Niaspan, and the TriCor/TRILIPIX franchises.  The company just completed its acquisition of Advanced Medical Optics, strengthening its medical device unit.  Furthermore, the company issued upbeat guidance that foresees another year of double-digit gains in earnings and sales for fiscal 2009.

United Technologies (UTX) recently reported growth in the last quarter.  UTX grew earnings at an eight percent clip during this time (slightly above consensus estimates) and issued guidance for the coming year that was in-line with analyst estimates.  When taking away the effect of a strengthening dollar, sales would have risen three percent as well.  The company managed to squeeze profits from its aerospace division offsetting results from Otis Elevator which fell 14% and Carrier Heating and Cooling which dropped by seven percent.

Finally, could there possibly be any good news from the financial sector these days?  You have to look for it but Hudson City Bancorp (HCBK) reported record earnings of $124.3 million for its most recent quarter.  HCBK lived up to the title of “Best-Managed Bank of 2008″ which was recently awarded it by Forbes.  The bank is managed the old-school way, offering competitive yields on deposits and maintaining closing costs and mortgage rates that among the best in the industry.  It is a top 25 bank by asset size and its base of operations is in the New York metropolitan area.  The company also increased its dividend by a penny to 14 cents per share.  In these days of relentless bad news out of the financial sector, this company is a breath of fresh air.

Obviously, this is not an exhaustive look at any one of these companies, but it is a reminder that if you keep your eyes open there are companies doing the right things and strengthening even in a nasty economy.  These are just some of the companies that have reported so far this week.  We will be very interested in the results later today of EBAY (EBAY) (who had a great holiday season) and Apple (APPL) (who always offers conservative earnings guidance only to beat it later).