In the spring of 2003, analysts at Prudential established a target price for eBay, justifying the P/E values in their analysis by appeal to PEG. Their report stated that their assump- tions of a P/E of 75 to multiply 2003 earnings, and a P/E of 50 to multiply 2004 earnings.

...equates to P/E/G ratios of 1.5 and 1.0, respectively, which we believe are reasonable, compared with those of other growth companies. We note that the S&P 500 currently trades at approximately 16.5 times forward-year earnings, equating to a P/E/G ratio of 1.3.

Discuss the reasoning of the Prudential analysts.