Things weren't that pretty over at eBay Inc. (NASDAQ:EBAY) in previous quarters as eBay stock declined 34% in the past year taking it to a low of $22.83 in August. Last quarter, however, eBay charmed the Street when it reported third-quarter financial results. Even Cramer did a backflip and considers eBay a value Internet stock. The stock climbed from its August low to hover around $30 lately.
For fiscal 2006 fourth quarter, consensus analyst estimate calls for earnings of 28 cents per share, in line with the company's guidance, and up from 20 cents last year. eBay gave revenue guidance for Q4 2006 to be in the range of $1.615 billion to $1.675 billion. According to Thomson, analysts call for a 25% growth in sales to $1.67 billion.
eBay will be reporting Wednesday January 24th after the close, and I'll liveblog the webcast beginning 2 p.m. Pacific, 5 p.m. Eastern. It will be interesting to see how eBay does. Here's what analysts (and I) expect to hear:
This quarter, eBay signed two major deals: eBay recently purchased StubHub and agreed on a joint venture in China with Tom Online Inc. (NASDAQ:TOMO), dissolving its own eBay Eachnet. Analysts will undoubtedly want to hear more about these two deals and how they would be affecting eBay going forward.
The other ongoing major concern has been organic growth, especially domestically. Listing growth rate has seen a slowdown, but selling prices have increased, offsetting the weakness in listing growth. International growth would also be scrutinized. In that respect, analysts would want to hear about the recent holiday season and the IT campaign. Margins were also a concern and analysts would want to see an improvement.
And of course, no results would be complete without eBay's other "two powers" -- Skype and PayPal. Skype has started charging this quarter for SkypeOut calls -- investors would want to hear about revenue expected from this program as well as its adoption rate.
Last, but definitely not least, PayPal, which has been an increasing contributor to eBay's revenue. PayPal has increased its reach, but Google Checkout has also intensified competition. Did that have any impact on PayPal? What was the effect of PayPal's $100 million holiday promotion? What about PayPal in China following the deal with Tom Online?
[[eBay's guidance for the full year 2006 calls for net revenues to be in the range of $5.865 billion to $5.925 billion and earnings per share in the range of $1.01 to $1.02. eBay expects revenue growth for 2007 in the range of 17% to 21% over 2006 revenues. Operating margins are expected to improve by at least 0.5 percentage points over 2006. Earnings per share are expected to grow by at least 20% over 2006 EPS.]]
Also check out some other earnings reports that we're following, and let us know your thoughts on earnings expectations.
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Reader Comments (Page 1 of 1)
1-22-2007 @ 5:19PM
Randy Smythe said...
Put me on the Bear side (surprise) I haven't seen much improvement in the marketplace business and I still believe Skype will be a drag on earnings.
eBay may hit their revenue guidance but increased expenses will cause them to miss earnings by maybe a penny.
1-24-2007 @ 1:31PM
Tony P. said...
"Listing growth rate has seen a slowdown, but selling prices have increased, offsetting the weakness in listing growth."
This statement references an article by Ben Charney, which claims:
"There's also been an increase in the average selling prices of goods, due to eBay listers selling higher quality goods."
The Average Selling Price (ASP) has increased due to the elimination of the China fraud & scamming sellers. Their typical technique was to sell items for 1-cent to 99-cents and charge exhorbitant shipping costs (most times, no product was ever delivered).
When tens-of-millions of listings that add only pennies to the ASP, are eliminated, the ASP increases. That's basic math.
The metric that all sellers closely watch is the Sell Through Rate (STR) - it has much more of an impact than the ASP. It doesn't matter if a seller gets 200% more for one item than he expected, not if his other 100 items didn't sell. That's basic business.
The STR was approx. 70% in 2002. This past year, it hovered around 45%. Currently it is approx. 30-35%.
The latest ebay move, SMI, where bidder's ID are hidden on auctions over $200, has caused the STR graph to look like the profile of K2. \
Any chance of upping the ASP by way of high-dollar items is being significantly hindered. I ask you - would you bid on an item if you couldn't verify the identity of other bidders?
1-24-2007 @ 4:32PM
Randall said...
Well, I was wrong. eBay did show healthy growth at the bottom line. But guidance for 2007 was conservative.