Shares of online retailer eBay Corp. (EBAY) traded sharply higher in after-hours trading following a stronger-than-expected fiscal fourth-quarter earnings report this afternoon.

The company reported earnings of 52 cents per share, beating the 47 cents that analysts had been expecting to see. During the same period last year the company had earnings of 44 cents.

eBay, Inc. (EBAY), the major name in online auctions, is down nearly 7% as I write this. Volume is extremely strong. A bad reaction to the latest earnings report is responsible for all the selling. Is the pullback an opportunity?

It's always difficult to buy a pullback, isn't it? A significant one like 7% is particularly difficult. You have to wonder if your bullish belief is on the mark or completely and utterly wrong. In the last twelve months, eBay has been trending higher. And it wasn't too long ago that the stock hit a 52-week high.

Pointing at decreased listing volume, slower than expected growth, and issues of currency exchange rates, Kaufman Bros. analysts have downgraded shares of eBay Inc. (EBAY). Kaufman analyst Aaron Kessler indicates that his company remains positive on eBay, even though it has downgraded the stock from buy to hold.

It would seem that the issue of currency exchange might be the greatest concern here, as many of us wait to see how valuation of the yuan shall unfold. If the yuan appreciates significantly, which it probably won't, it could mildly affect eBay's listing mix, but probably not to any noticeable degree.

Online auction giant eBay (NASDAQ: EBAY), a business that counts Amazon (NASDAQ: AMZN) and Yahoo! (NASDAQ: YHOO) as related companies, was not popular in Wednesday's after-hours session. The third-quarter report just didn't do it for Wall Street, so Wall Street decided to make some trouble and bring the per-share price of the stock down by 4.5%. Oh sure, the company beat earnings by the most famous amount there is -- the proverbial penny -- but, according to this Bloomberg piece, guidance was not so inspiring.

The top line was actually pretty cool. Net sales saw an increase of 6%. Unfortunately, the bottom line couldn't take advantage of such growth. On an adjusted basis, net income dropped 16% to 38 cents per diluted share. And, as I just said, that was one penny ahead of the analysts.

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.

I saw some interesting Nielsen data posted at Silicon Alley Insider the other day about traffic levels at eBay (NASDAQ: EBAY). They seem to be on the decline. I don't want to spend time repeating a bunch of the numbers here, but suffice to say that trends in unique visitors and page views on a year-over-year basis have not been favorable to the online-auction entity. One quick example would be the 33% drop for the page-view category seen in October.

What the heck is going on? Man, I remember when eBay was loved unconditionally and considered to be the best yard sale on the block. Heck, it wasn't just for closet-cleaning exercises; a person infused with even a modicum of an entrepreneurial spirit could easily start a business on the site. And its brand was second-to-none in this space. Well, eBay's brand equity remains high, but the bloom has definitely come off the rose, at least from my perspective.

On an anecdotal basis, I've heard many complaints about eBay, especially from the point of view of the sellers. But there's no question that eBay has to do something about the declining stats. People are spending less time at the site, and that surely won't do much in terms of appeasing the sellers.

eBay, Inc. (NASDAQ: EBAY), which competes with Amazon.com, Inc. (NASDAQ: AMZN), Yahoo!, Inc. (NASDAQ: YHOO), and Google, Inc. (NASDAQ: GOOG), reported earnings for the third quarter on Wednesday. Net revenue increased 12% to $2.1 billion. Earnings on an adjusted basis were $0.46 per diluted share versus $0.41 per diluted share in the similar quarter one year ago. That was good for an 11% growth rate.

As I pointed out in my earnings preview, the call was for $0.41 per share. So eBay easily beat Wall Street's analytical wizards. But, in this market, it's all about the forward guidance. It just doesn't matter anymore, the economy is tanking, and traders are selling things off left and right. According to this source, management has lowered the full-year outlook for earnings to a range between $1.69 and $1.71 per share as opposed to a previous expectation of achieving earnings between $1.72 and $1.77. This is bad news, of course, but eBay did manage to increase its operational cash flow. Net cash from operations went up by 10%, coming in at $693 million. So there's that, at least.

It isn't enough, though. eBay looks like it's going to have a rough time along with the economy. Its stock may be cheap, and management may be repurchasing shares (eBay took back 25 million shares during the Q3), but it isn't a buy unless you're a very long-term investor. eBay closed down over 13% during regular trading hours on Wednesday, and was down another 3.5% during the after-hours session. I can't see why the stock won't be heading lower. Again, if you've always wanted to be in eBay, this is probably a decent enough price on a valuation basis for those with a long-term horizon, but I would imagine that any guidance is at risk now considering recent economic data. That means even better valuations may be ahead.

Disclosure: I don't own any company mentioned; positions can change at any time.

When eBay, Inc. (NASDAQ: EBAY) recently began focusing on being more of a retail storefront than an online auction site, many saw it as the nail in the coffin of what was once an internet darling. Higher fees, angry sellers and a multitude of changes at eBay in recent years have many writing the company off as progress peaked in 2004 and has been falling ever since. Even former CEO Meg Whitman did not waste a chance on going over her self-imposed 10-year stint as the company's leader, having now left the company as of last year.

To add insult to injury, free classified listings are popping up all over the web to take over for what made eBay so powerful: connecting buyers and sellers for a transaction outside of the normal retail landscape. This grassroots commerce is what made eBay what it is. Its customers -- buyers and sellers -- did not want a normal retail transaction; they wanted a flea market and that is what eBay became. Except, that "flea" became an 800-pound gorilla.

Free classified providers like Oodle are winning business all over the web for niche audiences like those at MySpace.com and Walmart.com, two of Oodle's larger customers. Even localized free classified websites like Oklahoma City's OK4Free.com are getting in on the action. These are free websites to list items on -- unlike eBay. And they could be eating eBay's lunch soon if not already. To some who think eBay is turning into an also-ran in the online classified business, the welcome (albeit, smaller) competition is a good thing. Now, if someone could build a directory of all these free classified sites, customer defection from eBay could be quite a bit more rapid.

The uprising against eBay (NASDAQ: EBAY) by its sellers is now scheduled to last an entire week from February 19 to February 25. According to CNNMoney, "Sellers say eBay's new policies are likely to cost them more money, but what's really inspired an outpouring of wrath is an adjustment to eBay's feedback system: sellers will no longer be able to leave negative commentary about their buyers."

Under the new system, egregiously bad behavior by buyers will not be shown to other customers coming to the auction site.

The action does not come at a particularly good time for the big online auction company. Its shares have fallen from a 52-week high of $40.73 to under $28, fairly near their period low. Investors do not need another reason to be tempted to sell the stock.

Why management made the move is still something of a mystery. Obviously the company believes that over time it will make more money with the new system, but the bad PR and loss of some business from sellers may offset that.

A company that is already in the dog house with Wall Street would be better off waiting for good news and a recovery in its shares before making a move that risks harming its top line.

Douglas A. McIntyre is an editor at 247wallst.com.

eBay (NASDAQ: EBAY) is recently up $1.67 to $34.19.

American Technology Research says: "We recommend that investors consider EBAY as a defensive play-the shares as attractively valued according to just about every traditional metric, EBAY offers insulation from a U.S. consumer spending slow-down via its substantial international exposure."

EBAY December option implied volatility is at 33, January is at 38 and April is at 40. EBAY average option implied volatility over the last 26-weeks is 37 according to Track Data, suggesting decreasing near term risk.

Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

The iron is hot for the striking, in fact it's blazing red hot. Right or wrong, there's another "shake down" happening at eBay (NASDAQ: EBAY). I'll spare you the details.

I'll get right to the point here because I know you have other reading to do. It's time for someone, anyone, to readjust the online auction game. However, I think it's about time to give up expecting that savior to be Google (NASDAQ: GOOG).

Someone with a couple million dollars needs to find and use the synergies among the growing multitude of independent online auction sites. I'm not talking about someone trying to buy them all in an attempt to sew them together. What is needed to completely change the playing field is for one single entity to create a one stop pipeline where all the little auction sites can be found.

MurderAuction.com is easily one of the creepiest websites I have ever visited. The site is a haven for collectors of "murderabilia" -- mementos related to the cases of famous criminals, including prison artwork like a sketch of Osama Bin Laden by Washington DC sniper Lee Boyd Malvo and the psychiatric evaluation of serial killer Ed Gein.

It's difficult for me, and probably most of our readers, to understand why anyone would want to own this stuff. Texas Senator John Cornyn has had enough, and has introduced legislation to put an end to this cottage industry. His law would make it illegal for state and federal prisoners to mail such items for the purpose of interstate commerce.

What's interesting is that prisoners are generally not allowed to run businesses behind bars anyway, and they generally don't profit from the sale of their artwork on sites like MurderAuction. Some inmates will send their work to followers who send them "fan mail" and then the work turns up online. But since the inmates aren't profiting and, in many cases aren't aware of the market for their work, it's hard to see how it qualifies as interstate commerce.

It's hard for me to understand why the government should play a role in this. It seems like a freedom of expression issue, and I don't see the point of using government resources to stop collectors from trading murderabilia online. If the prisoner if profiting, that's illegal anyway.

Of course, sites like eBay (NASDAQ: EBAY) should, and do, ban the listing of murderabilia on their sites. But why should Uncle Sam stop collectors from trading artwork?

Does eBay (NASDAQ: EBAY) still have the image of a popular and friendly place to sell and buy everything from cars to beanie babies to cell phones to wrapping paper? The sheer amount of stuff on eBay for sale (from junky coffee cups to Hummers) still makes the company's website exceedingly attractive to millions of Americans, as well as millions of other consumers and sellers across the globe. But not all has been rosy for the world's largest online auction house in recent years. Rising fees, growing customer dissatisfaction, and an exodus of certain sellers all have been highly publicized and have given eBay a few large black eyes. The auction website keeps on churning though, and listings seem to be as plentiful as ever. Yahoo! (NASDAQ: YHOO) even announced that is would discontinue its Yahoo! Auctions website soon. My guess? All auction customers were using eBay instead.

For a "newbie," trouncing around eBay looking for things can be a somewhat daunting experience. Does this make it likely that a transaction may not take place? After all, there are hundreds of Nintendo Wii accessories on eBay right this second -- what makes one better than the other? Are customers shopping on price alone, or opting to not shop at all? The auction juggernaut is reaching middle age, and it seems the stagnant strategy that was once darling to its customers and visitors is getting an overhaul. It's time for that midlife-crisis Corvette to spruce up its image, yes? What can eBay do in the next twelve months to grow beyond its past as an "online auction?" Meg Whitman, eBay's CEO, has a cryptic answer for that one.

A recent point Meg tried to make is that the company she leads needs to provide an easier experience when buying products from its auctions and make inroads (and off-ramps) to the online marketplace seem more like a physical shopping experience. Remember, eBay does not make money from browsers and lookers, but from transactions and listings. Anything that ups the number of transactions (which drives more listings) is a good thing for eBay and its investors. With that, eBay CEO Meg Whitman recently said "'Our user experience has always been fantastic, but it didn't keep up, in my view, as well as it should have ... you will see more changes to eBay's buyer experience in the next 12 months than you probably have seen in the past three or four years.'' Let's hope so.

I've been getting buzz about major activity dealing with Yahoo!'s (NASDAQ: YHOO) auctions. As of this writing, it's difficult to sort out. I have encountered a site announcement stating that Yahoo! Auctions is closing shop and I have encountered stories that claim Yahoo! Auctions is being purchased by Jack Ma of TaoBao fame. One thing is for sure, something is happening and I'm relatively sure that it's not just a ploy to throw some distraction into the on-again/off-again Microsoft to Yahoo! negotiations. It's clear that Microsoft (NASDAQ: MSFT) seeks to join forces with Yahoo! in some manner, and it appears that Yahoo! Auctions are slated for retirement, but at this point all of the other noise is just that -- noise.

For the WSJ's take on the MSFT/YHOO story, and a bushel of public comments, click here.

I'm speculating that the increasing pressure by the IRS toward requiring increased revelation of auction sales statistics may be playing a part in the Yahoo! Auctions closure. It's a given that the taxing authorities aren't going to leave the internet alone. I feel that it will be only a short while before the IRS selects a few "big time" online auction sellers to make examples of in a token tax crack down.

Additionally, we must consider that in November 2007, many internet sales regulations are back up for review. It's time to hold your breath, all you small-time internet retailers. The sheriff's comin' to town.

An announcement from eBay states that a new auction bidding assistance feature is being added to their site. Overall the eBay sellers have again responded by questioning this change. A basic (edited) explanation of the feature as described to eBay sellers is as follows:

When a seller uses the prefilled item information provided by eBay (a product description template), and a potential buyer confirms a bid they make on that item which is then deemed by the eBay system to be substantially lower than the average selling price for identical items, the eBay system shall post for that bidder the current average selling price for identical sold items. Thus, the bidder may be prompted to enter a higher maximum bid.

eBay representative, Evan Liang states:

"We have been testing this enhancement with a small sample since March and have seen an increase in the number of buyers who use proxy bidding. We will continue to carefully monitor buyer behavior and we can and will turn this feature off if we see any negative impact. That being said, this feature will be seen by very few buyers, mostly inexperienced users with unrealistic expectations. If the community does find instances where this is negatively affecting bidding prices please feel free to get in touch." Evan can be reached at eliang@ebay.com.

Of the 160 eBay seller responses I've reviewed: (responses, not individual sellers)

Approximately 80% of the responses denounced this move by eBay. Approximately 10% of the responses were gaurdedly positive. Approximately 5% of the responses were genuinely positive. Approximately 5% of the responses were neutral.

eBay sellers were unaware this move was being considered. eBay testing data and projections have not been made available to the sellers. This announcement was placed on the eBay general announcements page and was not directly sent to sellers in the same manner as less important promotional items.

Some of the concerns expressed by long term eBay sellers follow:

1.) Doesn't this "fly in the face" of what classic selling by auction truly embodies and isn't this contradictory to Meg Whitman's "restoring the magic" claim?

2.) Will this change actually discourage bidders from exceeding the system generated average?

3.) Will this system actually create a downward trend in it's own averaging?

4.) Why are the test results unavailable to sellers?

You may view one discussion about this subject using this link: eBay Seller Central Discussion Board