Not surprisingly, fantastic growth continued during the fourth quarter at Best Ideas Newsletter holding eBay (NASDAQ:EBAY). Revenue surged 18% year-over-year to $4 billion, a touch better than consensus expectations. Earnings per share, on a non-GAAP basis, grew 17% compared to a year ago to $0.70.
The continued resurgence of the core eBay business continued uninterrupted, as revenue surged 16% year-over-year to $2 billion, which coincided with 16% gross merchandise volume growth ($19.1 billion). While PayPal grabs all the headlines, the performance of eBay's marketplace has been fantastic over the last several quarters. The eBay marketplace, in our view, has reached a similar positioning as Amazon (AMZN) - a testament to how much the site has evolved. The growth of fixed payments, power sellers, and the need for people to generate extra income has certainly been a factor in the growth, but it seems that mobile is having a better-than-anticipated impact on the business. Not only does the mobile application allow consumers to comparison shop, but we think it also spurs spontaneous bidding - a surprisingly effective revenue driver.
CEO John Donahue provided some interesting commentary on mobile:
Mobile is bringing new users to eBay and delivering strong growth. For 2012, mobile attracted over 4.3 million new users to eBay and generated $13 billion in mobile commerce volume. That's well over twice our volume from the previous year and well ahead of our original $10 billion forecast for the year.
PayPal growth was spectacular, as we've come to expect during the past few years. Revenue surged 24% year-over-year, to $1.5 billion, on 24% total payment volume growth that represented over $41 billion in transactions. PayPal's network effect seems to be strengthening, as account openings accelerated during the fourth quarter to the fastest pace in years. PayPal's partnership with Discover (NYSE:DFS) is set to launch in the second quarter of 2013, and we think payments growth could experience a nice boost from physical acceptance. With innovations like pre-ordering that will allow consumers to skip lines, we can see this partnership being highly successful.
While competition from PayPal continues to mount with services like V.me from Visa (NYSE:V), as well as Square, we think the growth of the broader electronic payments market will allow PayPal to endure its current growth trajectory.
Looking ahead, eBay offered in-line guidance for the first quarter of $0.60-$0.62 in earnings on $3.65-$3.75 billion in revenue. We're not worried that guidance didn't come in ahead of consensus, as we think management is being conservative to temper expectations. 2013 guidance was also in-line with consensus as the company expects revenue of $16-$16.5 billion driving earnings per share of $2.70-$2.75.
Overall, we like what 2013 has in store for the firm. Payments growth should remain robust, and the resurgence of the eBay marketplace is a trend we think will prevail.
Additional disclosure: EBAY and V are included in our Best Ideas portfolio.