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eBay (NASDAQ: EBAY), an online site for auctions and sellers whose colleagues include Amazon (NASDAQ: AMZN), Google (NASDAQ: GOOG), and Yahoo! (NASDAQ: YHOO), reported Q4 and full-year earnings on Wednesday after the bell.
Net sales decreased 7% to $2 billion for the quarter, and adjusted income dropped 9% to $0.41 per diluted share. The bottom line actually beat estimates by two pennies according to Trey Thoelcke's Before the Call piece. The top line was below estimates, unfortunately. For the year, net sales increased 11% (as can be expected, the stronger dollar caused this divergence in terms of the revenue picture) to $8.5 billion, and adjusted earnings per diluted share increased 12% to $1.71 per share. Sales essentially met expectations, while earnings beat by a penny. Nice.
But was it nice enough? In the after-hours session, eBay shares shed 6% of their value. Quite honestly, I can see why that happened. During the regular session, shares were bid higher by an almost equal amount. A bit of selling on the news seemed warranted. I do have to say, though, that eBay delivered a good amount of free cash flow, well over $2 billion, in fact, for the year. While that's cool, if you take a look at the cash-flow statement for the quarter, you'll see that cash from operations decreased. Going forward, eBay's stock will most likely have a tough time appreciating in value.
Sure, this earnings report wasn't a disaster or anything close, but I just don't see the numbers convincing the institutions on Wall Street to step up and buy (as a matter of fact, this article talks about how the guidance was disappointing to investors). And if they're not going to, why should you or I? This is a weak stock, there is no dividend yield associated with it, and it is probably better left to value players with a high quantity of resilient patience.
So, for me, I'd say eBay is a sell. I can't see it helping a portfolio, and I believe there are better investment alternatives out there that would interest me. As Brian White wrote a while back, eBay's business model is evolving over time. While its brand equity still centers on auctions, the site doesn't necessarily focus on that process anymore. It'll take time for the company to find its second wind. Until then, I'll stay away.
Disclosure: I don't own any company mentioned; positions can change without notice.
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Reader Comments (Page 1 of 1)
1-24-2009 @ 11:44PM
Seller101 said...
What eBay fail to analyze is that their policies and changes are not gear to help their core supporters, the sellers! We the sellers are the ones that make the money for ebay, the direct consequence is very simple we the sellers are no listing as many items as we once did, because the Sellers fees are used to staff programs geared to prevent sellers from selling on Ebay, the coveted Best Match search is fatally flawed, it list the most expensive items first –hence making more money for ebay, if they sell- We can't believe that eBay is using Their coveted ‘Best Match” search engine, As their vehicle for a better buyer experience! The reason most sellers are switching to fixed priced sales is because their merchandise is getting buried in the "Best Match" black hole.
The only reason auctions have gone out of favor is because ebay has relegated them to the bottom of the barrel and cater to big ticket uninteresting and overpriced things, which for the most part DO NOT SELL, but ebay still gets their insertion fee.
Ebay imposes a policy that cuts deeply into sellers pockets, violates the Bill of Rights, and makes it harder to do business, Sellers are only allow to leave positive feedback, turning feedback into a senseless, one way only, extortion ridden tool, the feedback, which sellers cultivate for years, means nothing now.
The new mandatory Paypal rules are so bogus-- and smack of restraint of trade. They tried this in Australia and lost. Who ever heard of a venue outlawing checks, MO or legal tender? Ebay owns Paypal and with listing fees, final value fees and Paypal fees it's double-dipping on a sale.
Take this mandatory Paypal rule. It has poor security, and now Ebay wants us to only use that payment system? It would be like going into a Sears to buy a lawnmower with cash or a check and told 'we only accept Sears credit cards.' It's madness.
Ebay flourished as people sold off Aunt Tilly's silver set or Uncle Waldo's Elvis records.
The Best Buyer Experience is coming to eBay To find great products at great prices! Buyers come to eBay to find a bargain, Buyers come to eBay to experience the eBay That wants to offers the best deals in the internet! But now eBay default search systems, List more expensive items first with total disregard of ending times or pricing These changes are causing a tremendous Decrease on sales with the direct consequence Of a decrease on the number of successful listings.
The DSR system is another failure, the feedback rating is not based on a 100 point scale, For example, from 1 to 5, 1 is poor, 3 is average and 5 is excellent. With ebay, 4,5 is average and 5 is good! Consequently making the seller looks bad, For this reason, good sellers offering great service and products are being suspended from ebay by record numbers, this cuts the core business at ebay Unfortunately, Ebay management become so enraptured with its tale of its own brilliance that they thought they could afford to batter and bleed the sellers over and over again, forever. Ebay Stock was $30-$32 less than a year ago and yesterday dropped to $11.67 A year ago, EBay said it would reduce listing fees and make selling standards more stringent to attract buyers, on the contrary sellers are listing less not only that but the smart ones sold their ebay stock! It won’t be too long too see ebay stock fall to $6 or less, Ebay is pushing away its partners, sellers and buyers, it is only going to make profit softer and push away investors, as ebay CEO said “We didn’t gain ground, but we didn’t lose any.” Lets see if he can say the same in this coming summer.
1-24-2009 @ 11:25PM
Tracy Riggs said...
I have to agree with the above statement! eBay today is a sorry institution that is losing ground fast.
eBay investors can only hope for a miracle at this point.
eBay stock is in the toilet big time! For the life of me I can't figure out why they are letting this happen? Have they no pride? No shame?
They are taking this company down little by little. Seems they just don't care!
Even Wall-Street is not interested anymore! They know a loser when they see one I guess!
What a shame to have this company go to the dogs.
Donahoe is not capable of running this company. He seems determined to run this company into single digits for his shareholders by the end of the year!
As a shareholder of eBay I wish he would just go away and let someone with brains run this company before it's too late.